TCAP - 3Q24: Miss on ECL from THANI and non-NII

With a miss on ECL (from THANI) and non-NII, TCAP’s 3Q24 results reflected rising ECL, contracting loans, flattish NIM and weaker non-NII. We keep it as Neutral with an unchanged TP of Bt52. We see it as a dividend play and suggest holding the stock for a good dividend yield of 6.4% on 2024.

3Q24: Miss on ECL from THANI and non-NII. TCAP reported 3Q24 earnings of Bt1.67bn (-13% QoQ, -7% YoY), 8% below our forecast on larger-than-expected ECL from THANI and lower-than-expected non-NII.

3Q24 highlights:

Asset quality: In line with figures from THANI (60.1% held subsidiary), NPL ratio rose 24 bps QoQ. Credit cost shot up 90 bps QoQ (+46 bps YoY) to 2.43%. LLR coverage slid to 156% from 160% at 2Q24.
Loan growth: -1.2% QoQ, -5.7% YoY, -3.3% YTD.
NIM: +2 bps QoQ as a result of a 3 bps QoQ rise in yield on earning assets against a 1 bps QoQ inch up in cost of funds.
Non-NII: -28% QoQ, (-31% YoY), due to a seasonal fall in dividend income, lower net insurance income and loss on NPAs.
Share of profit from affiliates: +1% QoQ (+14% YoY), in line with results at TTB (24.95% holding).

Selling TNS. TCAP has signed an MoU for the sale of its entire 89.97% in Thanachart Securities Public Company Limited (TNS) to TTB. We expect this transaction to be finalized in 2025, giving some earnings upside in 2025 from a potential realized gain on investment in TNS.

Maintain Neutral with a trim in TP. We keep TCAP as Neutral with an unchanged TP of Bt52 (0.7x PBV for 2025F).

Key risks: 1) Asset quality risk from an uneven economic recovery and the global economic slowdown, 2) higher losses on defaults from a fall in used truck prices, 3) NIM risk from a faster rise in cost of funds than expected, 4) downside risk to loan growth from falling truck sales and 5) ESG risk from market conduct.