Mr.Piti Tantakasem, CEO of TMBThanachart (ttb), mentioned "Such an improvement in financial performance was a result of our well-delivered business plan which was a combination of loan expansion, revenue recovery, cost efficiently and asset quality. This allowed the Bank to maintain a positive momentum in net profit since the 4th quarter last year.
In 2Q22, revenue continued to improve from previous quarter. For interest income, it was boosted by loan growth resumption. On fee income side, the recovery came mainly from bancassurance fees and commercial fees. These key fees helped compensate a slowdown in mutual fund fees which has been affected by volatile market conditions since the beginning of the year.
In terms of operating expense, although there were expenses from digital investment plan, cost synergy realization allowed the Bank to manage and maintain cost efficiency. This can be reflected by cost to income ratio which has consistently been in line with target.
Provision also declined. This was on the backdrop of lower asset quality pressure when compared to previous quarters as economy continued to recover. Besides, the Bank already provided some cushion in 2021 as a preparation in advance. We have also been prudent in asset quality management as well as proactively resolved NPL. With such efforts, our portfolio quality remains in control and NPL ratio is lower than industry average."
The details of 2Q22 and 1H22 financial performance are as follows.
As of 2Q22, total loans stood at THB 1,393 billion, increased by 1.9% from previous quarter (QoQ) and 1.6% from the end of last year (YTD). The Bank could grow retail loans as planned, led by mortgage, hire purchase, credit card and personal loans, respectively. Commercial loans also expanded, driven mainly by large corporate segment.
In terms of deposit, it was recorded at THB 1,395 billion as of 2Q22 which expanded by 2.6% QoQ and 4.2% YTD. This is in line with a plan to expand deposit base ahead of future interest rate trend. Key growth driver was retail deposit, led by ttb up and up. Key flagship products, ttb all free and ttb no fixed continued to grow as well.
As the Bank has acquired deposits at a faster rate than loans, interest expenses could consequently accelerate in short term. However, with a recovery in interest income following loan resumption and our funding optimization strategy, net interest income could improve slightly in 2Q22. On fee income side, the improvement was driven by bancassurance fees which started to recover and fees from commercial segment. As a result, total operating income rose by 0.7% QoQ to THB 15,889 million in 2Q22.
The Bank could continue to maintain cost efficiency, reflected by cost to income ratio of 45% in 2Q22 which remained within 45%-47% target. The ratio went up slightly when compared to 44% in the previous quarter. This was because expenses from digital investment plan started to kick in, coupled with a one-time item of loss from FX translation adjustment, incurred from the closure of a branch in Laos. With these factors, Pre-Provision Operating Profit or PPOP in 2Q22 was recorded at THB 8,752 million, relatively close to THB 8,818 million in previous quarter or marginally declined by 0.7% but rose 2.9% from 2Q21. For 6-month period of 2022 (1H22), PPOP totaled THB 17,570 million, a 1.0% increase from the same period last year (YoY).
In 2Q22, the Bank set aside THB 4,382 million of provision, compared to THB 4,808 million in 1Q22. For 1H22, provision was THB 9,190 million, compared to THB 10,971 million in the same period last year. Such a level is still higher than normal business cycle. On top of that, we continued to proactively resolve NPL and as a result NPL ratio dropped further to 2.63% from 2.81% at the end of 2021 while NPL coverage ratio increased to 133% from 129% at the end of last year. This reflected that our current level of provision is sufficient, and our risk cushion is high.
Lastly, capital adequacy remains high and is among the top tiers in banking industry. As of 2Q22, the preliminary CAR and Tier 1 increased to 19.9% and 15.8%, respectively. The figures were well-above D-SIB's minimum ratios of 12.0% and 9.5% required by the Bank of Thailand.
Mr.Piti concluded "For the rest of the year, TTB will maintain the quality growth strategy, meaning that we will grow new loans selectively and focus on low-risk customers. Key areas would be hire purchase and mortgage while ttb consumer will help boost growth in credit card and personal loans. This would support a recovery momentum in both interest income and loan yields going forward. For asset quality, we will keep our prudent policy to ensure strong financial position to be prepared for persistent economic challenges, and to continue to enhance the Bank's product and service offering to improve a life-long financial well-being for Thai people today and in the future.
Source: TMBThanachart Bank