TMB Bank earnings impress in 3Q with 3.3% QoQ growth

As well as 5.3% YTD growth.

TMB Bank posted impressive earnings in 3Q, with loans growing 3.3% QoQ and 5.3% YTD, driven by working capital loans from the corporate segment.

According to a research note from Maybank Kim Eng, meanwhile, NIM improved to 3.03% (vs Maybank Kim Eng's forecast of 2.9%) from 2.84% in 2Q14 due to higher asset yield (+13bps QoQ) and lower funding cost (-6bps QoQ). Non-interest income increased significantly from retail fees, further.

Nonetheless, loan-related fees and trading & FX fees remained weak. The bank had set aside THB823m or 80bps provisions vs Maybank Kim Eng's estimate of THB1b. NPL ratio dropped 8bps QoQ to 4.0% while coverage ratio fell slightly to 139% from 143% in 2Q14, in line with sector average.

Here's more from Maybank Kim Eng:

Partnered with IFC to launch credit support program. TMB partnered with International Finance Corporation (IFC) to provide additional credit guarantees to SME loans with an THB8b credit facility.

We see this development as having no material impact on TMB’s credit quality as the THB8b credit support program accounts for only 8.3% of small SME loans and 1.6% of the total loan book.

Raise earnings and maintain HOLD, TP THB3. We raise NIM by 4bps to 2.94% this year and assume lower credit cost of 65bps to reflect the lower-than-expected credit cost in 3Q14.

As a result, earnings are expected to grow 50%/10% in 2014-2015F. We like TMB for its operational turnaround and rising ROE outlook but we think its share price has already priced in the positive news.