TMB reported a net profit of THB 7,258 million for the first half of 2020, up 108% from the same period last year. Focusing on building liquidity, maintaining high capital and reducing non-performing loans to a low level of 2.34% has strengthened the Bank’s position against economic headwinds in the second half.
TMB or TMB Bank Public Company Limited and its subsidiaries announced today its financial performance ended June 2020. For 1H20, TMB recorded an increase in revenue from the recognition of TBANK’s financial results. Operating expenses for normal business operation and integration process were managed efficiently. As a result, Pre-Provision Operating Profit (PPOP) rose 119.2% year-on-year to THB 18,653 million. The Bank set aside provisions of THB 9,732 million which consisted of normal provisions and additional amounts to accommodate 2H20 economic outlook. In the asset quality aspect, the Bank has proactively managed and could reduce non-performing loan ratio down to a relatively low level of 2.34%. After provisions and taxes, the group recorded the net profit of THB 7,258 million, up 107.6% from 1H19.
Mr. Piti Tantakasem, CEO, mentioned on the overall performance, “For 1H20, things were generally in line with plan in terms of the merger, especially the realization of balance sheet and cost synergies and the execution of integration activities such as the launch of TMB and TBANK Co-location branches.
On the revenue side, 1Q20 performance was fairly on track. Entering into 2Q20, however, the impact from Covid-19 was worsening, both TMB and TBANK therefore have put priority on providing financial assistance to affected customers together with strengthening the group’s financial position given the expectation that Covid-19 situation would linger and continue to put pressure on business environment and asset quality through the rest of the year. Three key areas of financial position enhancement the Bank has achieved were as follows; firstly, the Bank has stored higher liquidity from expanding deposit base. Next was to ensure balance sheet quality by reducing non-performing loans and the last was to maintain high capital base. These efforts have strengthened the group’s ability to tackle with economic uncertainties.”
At the end of the second quarter, the Bank could increase its deposits from previous quarter by 3.2% to THB 1.44 trillion, largely contributed by retail deposits namely No Fixed and All Free. Loans, on the other hand, declined 1.5% to THB 1.38 trillion due to a slowdown of new loans and the Bank’s direction to reduce portion of unsecured loans and shift toward secured loans, especially retail loan portfolio. Currently, more than 90% of retail loan portfolio is secured loans.
In terms of revenue, Net Interest Income (NII) and Non-Interest Income (Non-NII) were slow down from the first quarter. This was as expected and due to interest rate cuts and weakening economic activities in both business and household sectors. Consequently, total operating income was at THB 16,569 million, down 8.9% while operating expense was at THB 7,776 million, down 6.7%. PPOP, therefore, decreased to THB 8,791 million or down 10.9% quarter-on-quarter.
In the second quarter, the Bank set aside THB 4,972 million of provisions, 4.5% higher than the previous quarter. Such an amount included general provisions, an additional provision for forward-looking economic outlook and the recognition of THB 1.6 billion provision over TBANK’s investment in Thai Airways (THAI) debentures. Note that, total exposure in THAI debenture was THB 3.15 billion which represented approximately 2.0% of total investment portfolio on consolidated basis. Apart from that, the Bank and its subsidiaries have no exposure in loans nor other financial instruments related to THAI. After provision expenses and taxes, net profit in 2Q20 was at THB 3,095 million or decreased 25.7% from the previous quarter.
On the asset quality side, the Bank has proactively resolved problem loans through write-off and sales. Non-performing loans (NPLs) therefore dropped 12.2% from THB 44,183 million in the last quarter to THB 38,805 million. Non-performing loan ratio was down from 2.76% to 2.34%.
Liquidity was at high level, boosted by deposit growth and the Bank’s liquidity management. The Liquidity Coverage Ratio (LCR), which reflects the stock of liquid assets to support liquidity needs under severe liquidity stress scenarios of TMB and TBANK, consistently maintained above the BoT’s minimum requirement at 100%. The current level is higher than 200%.
Capital adequacy was strong and among the top tier in Thai banking industry. As of June 2020, the preliminary CAR and Tier 1 were reported at 18.5% and 14.6%, well above the Bank of Thailand’s minimum requirement of 11.0% and 8.5%, respectively.