4Q24: Positive surprise on asset quality
Better improvement in asset quality than expected in 4Q24 will be an immediate share price catalyst. We expect good recovery in 2025-2026, undergirded by easing credit cost, moderate loan and non-NII growth and NIM expansion. With the cheapest valuation among peers, we keep TIDLOR as our top pick.
4Q24: Beat on ECL offset by larger-than-expected opex. TIDLOR reported 4Q24 earnings of Bt1.04bn, in line with our expectation but 6% below consensus. There was a larger-than-expected fall in credit cost but this was offset by a larger-than-expected rise in opex. 4Q24 results were decent, reflecting: 1) a sharp 121 bps QoQ fall in credit cost, 2) a pickup in loan growth of 1% QoQ (+6% YoY) after mute loan growth in 3Q24, 3) a 28 bps QoQ fall in NIM with a 17 bps QoQ fall in loan yield and a 21 bps QoQ rise in cost of funds, 4) a 22% QoQ (+4% YoY) rise in non-NII on seasonality and 5) a worse-than-expected rise in cost to income ratio (+587 bps QoQ on seasonality, +579 bps YoY).
Positive surprise on asset quality = Cut credit cost forecast. TIDLOR’s credit cost fell a sharp 121 bps QoQ to 2.76% in 4Q24 (the lowest in two years), far below estimates. NPLs rose 5% QoQ but NPL inflow fell 36% QoQ, thanks to: 1) a stringent credit policy, 2) tailwinds from the government’s cash handout of Bt10,000 and 3) proactive debt collection by branches. After proactive write-offs in 2Q24 and 3Q24, write-offs came down a substantial 45% QoQ in 4Q24. In response to the positive surprise in asset quality, we cut our credit cost forecast by 20 bps to 3.4% (-5 bps) in 2025 and 15 bps to 3.35% (-5 bps) in 2026.
Loan growth picking up. After a relaxation in its credit policy, loan growth picked up to 1% QoQ in 4Q24 after a 0.4% QoQ contraction in 3Q24. We expect a continued pick up in loan growth to 10% in 2025 from 6% in 2024 due to less write-offs and a relaxation in credit policy.
NIM expansion. We expect NIM to rise another 29 bps in 2025 after +51 bps in 2024. We expect a rise in loan yield in 2025 upon more loan repricing from an acceleration in loan growth. Its cost of funds is expected to peak in 1Q25 and will benefit from an expected 50 bps cut in the policy rate in 2H25.
Moderate non-NII growth. We anticipate non-NII growth at 10% in 2025 and 9% in 2026 (vs. 11% in 2024), supported by rising insurance brokerage income. TIDLOR plans to set up a new company (NewCo) under Tidlor Holdings to operate the InsurTech platform, which will bring upside to insurance brokerage income in long term.
Expect good earnings growth ahead. We forecast good earnings growth at 15% per year in 2025 and 2026, driven by decent loan growth and non-NII at 9-10% per year, a continued NIM expansion and a gradual ease in credit cost.
Cheapest valuation. We keep TIDLOR as the sector’s pick with an unchanged TP of Bt21 (based on 1.8x PBV or 12.5x PE for 2025F), due to the cheapest valuation among peers (1.5x PBV vs. 15% ROE and 10.5x PE vs. 15% EPS growth for 2025).
Key risks: Key risks: 1) Asset quality risk from an uneven economic recovery,
2) credit cost risk from falling used vehicle prices, 3) rising competition from banks, 4) regulatory risk and 5) ESG risk from market conduct.
