Mr. Piti Tantakesem, CEO of TMBThanachart, mentioned "In 3Q21, it became even more challenging for Thai economy, given the prolonged Covid-19 situation and the widespread outbreak which triggered the lockdown measures. This continued to put pressure on revenue. Under this situation, cost efficiency is crucial. For TMBThanachart, we have maintained cost discipline and successfully executed cost synergy initiatives. As a result, operating cost was well-controlled and not accelerate during softening revenue trend even though we had integration activities and expenses going on. In 3Q21, operating income was reported at THB 15,663 million, a 3.4% decline from the same period (YoY). Likewise, operating expense reduced by 2.2% YoY to THB 7,268 million.
Provision expenses was set at THB 5,527 million. Such a level was higher than normal economic cycle but still lower than 3Q20 by 19.5% YoY. In 3Q20, we increased a provision level beforehand by a significant amount of THB 6,863 million. This led to YoY improvement in net profit. Given the fragile economic outlook, we will maintain high provision. We will focus on portfolio's risk assessment and stringent loan classification of both normal portfolio and the debt relief one which currently represented approximately 12% total loan portfolio. This is to ensure the prudence of portfolio management and sufficient provision level.
In terms of the performance compared with 2Q21, we continued to see revenue pressure because 3Q21 was the highest restricted period of the year before the measures were partially eased by the end of quarter. For the 9 months of 2021, we could see the effect from prolonged Covid-19 that has persisted since the beginning of the year while in 2020, business was going as normal in the first quarter."
Details of 3Q21 quarter-on-quarter and 9M21 year-on-year performance are as follows.
Total operating revenue in 3Q21 was THB 15,663 million, a 1.5% decrease from the previous quarter, weighted down by both net interest income and non-interest income. Net fee and service income, however, slightly rose as the Bank improved product and service offerings as well as sale and service channels. Cost was well-managed and in line with plan. Total operating expense came at THB 7,268 million, down 1.8% QoQ on the back of cost synergy realization, cost discipline and from lower expenses, related to lower business volume during the lockdown. As a result, cost to income ratio was relatively stable at 46%. However, some integration activities and expenses were postponed to 4Q21 due to the Covid-19 situations. Therefore, cost to income ratio is expected to stay at around 47%-49%. Provision was set at THB 5,527 million, up 0.7% QoQ. As a result, net profit was at THB 2,359 million, down 6.9% from the previous quarter.
For 9M21, the Bank generated total operating income of THB 48,406 million, a 5.0% decrease from 9M20. Total operating expenses was at THB 22,597 million, down by 4.0% YoY. Cost to income ratio of 46% was well on track. Provision expense was THB 16,497 million, relatively close to 9M20 level as the provision provided for each quarter remained at elevated level. Net profit for 9M21 was at THB 7,675 million, a 13.5% decrease from the same period last year.
Loans to customers at the end of 3Q21 was at THB 1,359 billion, stable QoQ but a 2.4% decline from the end of last year (YTD). The contraction in loans was due mainly to the Bank's quality growth strategy. As a result, new loan bookings remained moderate and smaller than repayment outflows. For non-performing loans, it was at THB 44.4 billion, slightly up from THB 43.5 billion as of 2Q21 and THB 39.6 billion at the end of last year. With slow loan growth, the ratio of NPL to total loans rose to 2.98%, still in line with NPL management plan and target.
On the deposit side, the ending balance was at THB 1,325 billion, stable QoQ but down by 3.5% YTD. Deposit movement was in line with the Bank's liquidity management during slow loan growth period and balance sheet optimization after the merger. The Bank continued to lower time-deposit to an appropriate level and to focus on acquiring flagship deposits such as ttb all free which showed continuous growth.
Lastly, capital adequacy remained one of the top tiers in Thai banking industry. At the end of 3Q21, the preliminary CAR and Tier 1 was reported at 19.7% and 15.6%, respectively. The figures were well-above the Bank of Thailand's minimum requirement of 11.0% and 8.5%.
Mr. Piti Tantakasem concluded "As for 4Q21 outlook, we see that the easing of restriction measures would be positive to economic activities. However, it is still a long road for economic recovery to pre Covid-19 level. We, therefore, will remain conservative and ensure the quality of our asset portfolio. The objective is to preserve our strong financial position in order to withstand Covid-19 crisis and to regain growth momentum once economic situation allows. Also, employees' health and welfare are one of our priorities."
Source: TMBThanachart Bank