4Q24: In line, weaker 2025 ahead, high DPS
In line with expectations, 4Q24 results reflected better asset quality, modest loan growth, stable NIM, stagnant non-NII and rising opex. We expect weaker earnings in 2025 as credit cost rises to a normal level. We keep TISCO as Neutral due to a sustainable attractive dividend yield but cut TP to Bt100 from Bt103.
4Q24: In line. In line with INVX and consensus forecasts, TISCO’s 4Q24 net profit was stable QoQ (higher non-NII offset by higher opex) but fell 4% YoY (higher ECL) to Bt1.71bn. Earnings in 2024 fell 2%, reflecting +32 bps in credit cost, -1% in loans,
-21 bps in NIM, +8% in non-NII and -89 bps in cost to income ratio.
Asset quality: Better in 4Q24, rising credit cost in 2025. NPLs decreased 3% QoQ to 2.35% with a 1.9% QoQ decrease in HP NPLs and a 3.3% QoQ decrease in title loan NPLs. Stage 2 loans fell 2.7% QoQ. Credit cost eased 5 bps QoQ (+14 bps YoY) to 0.57% in 4Q24. LLR coverage fell to 155% from 159% in 3Q24. TISCO expects credit cost to be >1% to 1.2% in 2025 vs. 0.59% in 2024 due to a resumption of a normal credit cost after depleting excess LLR. We raise our credit cost forecast by 5 bps each year to 1.1% in 2025 and 1.2% in 2026, a sharp rise from 0.59% in 2024.
Loan growth: Up QoQ in 4Q24, targets 3-5% in 2025. Loans picked up 1% QoQ but fell 1.1% YoY. Corporate loans grew 4.3% QoQ and 4% YoY. Retail loans slipped 0.1% QoQ and 2.9% YoY. TISCO targets 2025 loan growth at 3-5% vs. INVX forecast of 2%. In 2025, it will penetrate into title loans for motorcycle and homes and plans to resume expansion in new car HP loans.
NIM: Stable in 4Q24, targets better in 2025. NIM inched up 2 bps QoQ (-16 bps YoY), underpinned by a 2 bps QoQ (-3 bps YoY) slip in yield on earning assets and a 4 bps QoQ (+16 bps YoY) fall in cost of funds. It expects to enhance NIM in 2025 by raising the proportion of high-yield loans and easing cost of funds amidst a potential further cut in the policy rate. We forecast a 12 bps rise in NIM in 2025.
Non-NII: Stable QoQ in 4Q24, flattish in 2025. Flattish QoQ in 4Q24 (+10% YoY). A rise in fee income (+4% QoQ, +5% YoY) was offset by lower gain on financial instruments and dividend income. We expect a modest 1% recovery in 2025.
Cost to income ratio: Up in 4Q24, targets to ease in 2025. Cost to income ratio rose 109 bps QoQ (+31 bps YoY), due to a seasonal rise in opex. TISCO plans to ease cost to income ratio in 2025 by slowing Somwang branches and tightening personnel expenses.
Expect weaker 2025 earnings. We expect 2025F earnings to fall 8%, with a 51 bps rise in credit cost, 2% loan growth, +12 bps in NIM, +1% non-NII and 167 bps ease in cost to income ratio.
But sustainable attractive dividend yield. Despite weaker earnings, we expect TISCO to sustain DPS at Bt7.7 (Bt2 interim), giving high dividend yield of 7.8%.
Maintain Neutral. We keep TISCO as Neutral with a cut in TP from Bt103 to Bt100 (based on 1.85x 2025F PBV) as we raise our 2025F credit cost.
Key risks: 1) Asset quality risk from uneven economic recovery, 2) falling used car prices, and 3) ESG risk on market conduct and cyber security.
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