TMB Bank slated for a strong recovery despite disappointing 1Q17 earnings

Unexpectedly high provisioning expense is to blame for the weak 1Q17 bottomline.

According to Maybank Kim Eng, even though 1Q17 earnings looked soft (6%/5% below Maybank Kim Eng's/consensus) top lines continued on track and appear set for a stronger recovery. Loans expanded by only 0.9% QoQ but this is normal as 1Q is the low season for loans and we still expect an acceleration in 2H17 when economic growth gathers pace.

Here's more from Maybank Kim Eng:

Softened bancassurance, coupled with a lack of gains from investments were offset by its solid securities/asset management businesses. Lower opex (-9% QoQ) helped support the pre-provision profit so that it was virtually flat this quarter.

The disappointment in 1Q17 bottom line was solely due to an unexpectedly high provisioning expense (+0.3% QoQ vs. -6.2% QoQ expected). The good news is NPLs continued to fall (-3bps to 2.94%) and therefore we believe provisions should decline going forward.

However, credit cost this year may be a bit higher than thought. Accordingly, we raised our credit cost projection by 10bps for 2017F-2019F.