Analysts Rate “HOLD” on TISCO, Seeing Small Profit Growth in 2023 as NIM Comes Under Pressure

TISCO recorded a net profit of 7,221 million baht in 2022, increased 6.44% from a net profit of 6,784 million baht in 2021. The increase was supported by the recovery of banking business and a decline in expected credit loss (ECL). 

However,  businesses related to the capital market weakened compared to 2021 following the volatile capital market caused by global economic uncertainty. As a result, brokerage fee dropped by 19.2% (YoY) due to lower market trading volume, and asset management basic fee decreased by 15.6% (YoY) owing to a decrease in the sales of new funds. 


Maybank Securities (Thailand) (MST) stated in its research, it expects improving loan growth in the high yield segment in FY23E for TISCO. NIM should decline YoY amid the interest rate uptrend. Credit cost should stay low given TISCO’s low NPL ratio and high NPL coverage. MST projected a 7.6% dividend yield, the highest in the sector, as TISCO will maintain a high dividend payout ratio to improve ROE. 

MST recommended HOLD with a 3% higher TP at THB108 (1.96x FY23E P/BV, 17.3% ROE) after it raised earnings to reflect higher loan growth. Key risks are higher-than-expected credit and funding costs. 


Meanwhile, Daol Securities (DAOL) reiterated a HOLD recommendation on TISCO but raise a target price to Bt105.00 from Bt100.00 and 2023E PBV to 1.9x (+1.0 SD above its 10-yr average) from 1.8x (+0.75 SD) following its earnings forecast upgrade. 

Following an analyst meeting, DAOL was slightly positive about the bank’s guidance. The bank set a loan growth target of 5-10% YoY for 2023E, exceeding DAOL’s earlier assumption of +3% YoY, as it has a plan to increase the number of “Somwang” branches by 200 per year from the total of 450 branches, currently. With such an aggressive move, the bank may have to compromise with higher opex and narrower NIM. The bank also reported 4Q22 earnings results that were in line with expectations. Net profit expanded +1% YoY, +2% QoQ to Bt1.8bn as fee-based income increased at a faster pace than expected, which offset the impact of higher loan-loss provision and narrower NIM (due to interest rate hikes). The NPL ratio was stable QoQ at 2.09% as a result of higher loan growth. Note that the bank set aside the higher provision to increase its cushion as the recession looms. 

DAOL upgraded the 2023E net profit forecast by 3% to Bt7.4bn, which indicates a +3% increase YoY, as it raised its loan growth estimate and cut credit cost assumption. NIM is predicted to shrink further given an interest rate hike era. In 1Q23E, DAOL forecast net profit to decline YoY, QoQ as it expected the bank to aggressively mobilize fixed deposits to reduce its exposure to the upcoming policy rate hikes. 

TISCO has been in line with the SET Index in the past one and three months. Although the bank’s NIM will likely be under pressure from the potential policy rate hikes, TISCO has a track record of consistently paying a high dividend yield of 7% (about Bt7.60/share). The stock normally trades ex-dividend in April.


KGI Securities stated that despite challenging market conditions, while seeing TISCO maintaining its resilient earnings growth, which allows it to maintain a high dividend yield of 7% in 2022. Although fixed-rate loans dominate its loan portfolio, the ability to grow in H/P loan at high rate and grow more high yield loan segments should help it maintain its NIM in 2023. Thus, 2023 earnings are expected to rise moderately. KGI maintained its 2023 target price of Bt107.50, based on PBV 1.9x. KGI rated TISCO Neutral.