2 risks that TMB Bank must face in 2017

Export-oriented SME loans is one.

According to Maybank Kim Eng, one downside TMB Bank is facing is that export-oriented SME loan still is a major portion in TMB’s portfolio. Unless exports improve substantially, risk to NPLs remains.

Secondly, the establishment of PromptPay (government-backed notransfer-fee service) may hurt its leading deposit campaign “All-Free” (no transaction fee in exchange for very low interest rate), which is TMB’s major source of low-cost funding.

Here’s more from Maybank Kim Eng:

4Q operating results looked good. Both interest income (+2% QoQ on solid margins) and non-interest income (+9% QoQ driven by fee income in bancassurance/trade finance) improved gradually. Despite flat NPLs, provisions also fell by 12% QoQ (thanks to the high coverage ratio), boosting bottom line growth by 16% QoQ. The earnings are in line with our projection, but beat consensus by 14%.

At the analyst meeting after the results, management unveiled the bank’s 2017F financial targets, which are mostly in line with our above consensus projections. Management said the current coverage ratio at 140% is adequate to comply with the new IFRS9 accounting standard. And as NPLs are expected to fall, credit cost should decline this year as well.