TMB announced 1Q20 operating results, in line with target. Net profit registered double growth after it fully consolidated TBANK’s quarterly results. The integration process also progresses as planned.
TMB or TMB Bank Public Company Limited and its subsidiaries announced today its 1Q20 operating performance. The results came out in line with target and fully recognized TBANK’s quarterly results after the completion of TBANK’s share purchase transaction on 3 December 2019. As a result, Pre-provision operating profit rose to THB 9,862 million, up 91% from 4Q19 and 160% from 1Q19, respectively. The provision expense was THB 4,760 million, already complying with the new accounting standard, TFRS 9. After the provision and tax, the Bank reported net profit of THB 4,163 million, an increase of 158% QoQ and 164% YoY.
Mr. Piti Tantakasem, CEO, mentioned “The merger with TBANK has allowed TMB to unlock its scale limitation as its assets, deposits and loans have currently doubled in sizes. As a result, the focus in 2020 would be more on profitability improvement, driven by the synergy value realization. Aggressively growing business, on the other hand, would not be a key focus this year.
For the 1Q20 performance, overall is fairly in line with target. In the aspect of synergy realization, the Bank started to see the synergy value especially from balance sheet synergy and cost synergy. Apart from that, the merger process has progressed as plan, given that the Bank has successfully established the strategic bancassurance partnership with Prudential Life Assurance (Thailand) while the customer transfer and the launch of Co-location branches have already kicked off.
Mr. Piti Tantakasem gave more details on the operation that “as soon as the merger completed, the Bank started the balance sheet optimization initiatives. For deposit mix, the plan is to reduce the proportion of time deposits and replace with flagship products such as All Free and No Fixed. The overall performance in the 1st quarter was according to plan. Consequently, deposit was at THB 1.4 trillion, stable from the previous quarter.
In terms of loans, the outstanding was THB 1.4 trillion, up 0.8% QoQ, driven by hire purchase loans. This is in line with the Bank’s direction to increase the proportion of retail-secured lending. As a result, approximately 90% of retail loan portfolio is secured loans.
Such initiatives resulted in balance sheet synergy realization. This can be reflected by NIM improvement to 3.12% from 2.69% in 4Q19 and 2.89% in 1Q19. Net interest income (NII) was reported at THB 14,014 million, +73% from the previous quarter (QoQ) and +125% from the same quarter last year (YoY). Combining NII with Non-interest income of THB 4,182 million, +15% QoQ and +83% YoY, the Bank generated total operating income of THB 18,195 million, +55% QoQ and +114% YoY.
Operating expenses was THB 8,331 million, +26% QoQ and +76% YoY. The Bank also stared to realize cost synergy from the reduction of expenses in duplicated areas such as marketing expenses and IT system expenses. As a result, cost-to-income ratio declined to 46%, compared to the pre-merger level of 51%-55%. The Bank viewed that this year cost-to-income would remain within the target of 48%-50%.
With synergy realization from two areas, Pre-Provision Operating Profit (PPOP) was reported at THB 9,862 million, +91% QoQ, +160% YoY. The Bank set aside provision of THB 4,760 million to accommodate the prudent asset quality management and portfolio de-risking activities through NPL write-off and sales. With the new loan classification under TFRS 9, non-performing loans was THB 44,183 million. This represented an NPL to total loan ratio of 2.76%, still within the target of 2.80%.
After provision and tax, net profit was recorded at THB 4,163 million, +158% QoQ and +164% YoY. Capital adequacy remains strong with CAR and Tier 1 under Basel III at 18.8% and 14.5%, well above the Bank of Thailand’s minimum requirement of 11.0% and 8.5%, respectively.
Mr Piti Tantakasem concluded “for the following quarters, the Bank will focus on the execution of the merger plan to ensure a smooth transition which is expected to complete in 2021. In addition, the Bank has now put priority on assisting our customers in every segment during the Covid-19 pandemic.
As for the impact to bank’s operation, the impact is expected to be manageable because Thai banking industry has strong fundamentals in both liquidity and capital aspects. On top of that, supporting measures from the Bank of Thailand and the Ministry of Finance allow Thai banks to be more flexible in terms of operation and the offering of relief programs to customers.”