tmb bank plc....2.08% p.a. npl resolution 3.02% p.a. 2 nd quarter ended june-16 (not to scale) npl...

TMB Bank Plc.

Moving toward Digital Banking

Investor Presentation

1H16 and 2Q16 Performance Update

Make THE Difference

1H16 & 2Q16 Financial Performance

Asset quality

Upcoming Digital Banking

AGENDA

[2]

Continued to rebalance deposit growth and mix

-0.5%

+0.6%

Retail deposit

Deposits slightly rose 0.6% QoQ, driven by retail

deposits

For 6-month period, deposits slightly decreased by 0.5% YTD mainly to optimize deposit volume and mix

No-Fixed & ME, +13% YTD, in line with strategy to replace high-cost time-deposits

Transactional deposit growth was also on track. Retail transactional increased by +2% YTD

Cost of deposit declined 17 bps QoQ in 2Q16

mainly from replacement of high-cost deposit TD

and interest rate reduction of No-Fixed & ME

For 6-month period, 1H16 deposit cost (1.58%)

declined 26 bps compared to 1H15 (1.84%)

Key deposit rate cuts (base rate)

#1 No-Fixed 10 bps

#2 ME 20 bps, No-Fixed 10 bps

#3 ME 20 bps

#4 ME 20 bps

#5 ME 10 bps

[3]

Loan growth remained in 2Q, driven by mortgage loan

+2.0%+1.2%

For 6-month period, loan grew by 2.0% YTD, driven

mainly by mortgage loan

Retail +18% YTD, driven by mortgage (+28% YTD)

& credit card (+5% YTD)

Corporate -2% YTD

SMEs -0.8% YTD

Loan grew 1.2% QoQ, driven by growth from

retail loan

Loan yield declined 2 bps QoQ in 2Q16

For 6-month period, 1H16 loan yield (5.49%)

declined 23 bps from 1H15 (5.72%) mainly from

MLR and MRR reductions

[4]

Margin improvement supported by well-managed funding cost

6M2015 6M2016 YoY Growth(%)

THB11,422 mn THB12,102 mn 6.0%

+15 bps

NIM increased 15 bps QoQ to 3.13%, thanks to well-

managed funding costs

Loan yields declined -2 bps

While deposit cost dropped by -17 bps

With TMB strong deposit franchise, cost of deposit

can be managed down while key deposit volume

(No-Fixed & ME) continued to grow.

With higher NIM & growth in performing loan, NII

increased 4.1% QoQ

1H16 NIM also rose from 3.01% in 1H15 to 3.06%

1H16 NII grew 6.0% YoYNII

+4.1%

[5]

Non-interest income slightly declined due to income from capital

market and loan-related fee

1.3% 1.2% 1.2%Non-interest

income/ Earning assets (p.a.)


THB4,868 mn THB4,763 mn -2.2%

-6.1%

+4.0%

Total Non-NII decreased 6.1% QoQ mainly due to

Commercial banking fees as capital market income declined due to interest rate volatility

Retail fees continued to increase, supported by mutual fund fee (+42% QoQ) and credit card fee (+53% QoQ)

Therefore, 1H16 Non-NII declined slightly by

2.2% YoY

Commercial banking fees as capital market income declined due to interest rate volatility in 2Q16 and credit-related fee dropped by -12% YoY

Retail fees increased, mainly from bancassurance fee, +47% YoY

Non-interest income

*Non-NII excluded gain on sales of assets [6]

Retail fee remained an uptrend

444 384 396

65 64 79

976 843 921

222

237 278

0

400

800

1,200

1,600

2,000

4Q15 1Q16 2Q16

THB million

Fee income breakdown

Credit related fee

Trade finance

Cash mnt. & Payment

Mutual fund & Bancassurance

Credit card/ Merchant & ATM

Others

Total

Commercial fees

Retail fees


THB3,700 mn THB3,758 mn +1.5%

2,0571,842

1,915

Fee

income

Fee income increased 4.0% QoQ mainly from

retail fees

Mutual fund showed a positive trend with +42%

QoQ growth

Credit card fee grew +53%QoQ

1H16 fee income increased 1.5% YoY

Credit-related fee dropped by -12%YoY

LG fee increased by +37% YoY

Bancassurance grew +47% YoY

Trade finance +21% YoY

[7]

Operating costs were well-managed

Total operating income rose 1.1% QoQ

Operating expenses rose 6.3% QoQ.

Key factors were;

Lower personnel expense by -3.4 % QoQ

Higher marketing expense by +78.7% QoQ

mainly due to relaunch of All Free product and

commission fees from higher mortgage sales

Higher premises and maintenance expenses

mostly due to software expense

Higher other expense from positive impact

from asset revaluation in 1Q16

However, for 1H16, operating income grew by

3.5% YoY, while operating cost grew only 0.8%,

less than half of the revenue growth

**Operating costs exclude loss on impairment of properties foreclosed, provisions of obligation on transfers of non-performing assets and provisions for other liabilities

***Non-interest income excluded gain on sale of asset

+0.8%

+3.5%

+6.3%

+1.1%

[8]

Pre-provision operating profit grew 4.8% in 1H16

-2.6%


THB8,605 mn THB9,022 mn +4.8%

PPOP recorded at THB4,451 million in

2Q16, a slight decrease by 2.6% QoQ

Nonetheless, 1H16 PPOP grew 4.8% YoY

PPOP

[9]

Cost efficient was well-maintained

As a result, cost to income ratio was well-

maintained at 47.7% in 2Q16 and 46.6% in

1H16

6M2015 6M2016

47.2% 46.6%Cost to income

ratio

[10]


Asset quality


AGENDA

[11]

NPL formation is closely monitored

Note: 1) % NPL formation and NPL resolution calculated per total loan + interbank loan

2) Stated as annualized basis

NPL formation remained in line with expectation

Overall NPL formation during 1H16 was better

than same period last year mainly driven by

improved NPL formation in small SME as a result

of underwriting revision

Vintage analysis has shown better trend of NPL

formation

2.64%

2.08%1.86%

2.25%

1.64%

2.08%

1.0%

1.4%

1.8%

2.2%

2.6%

3.0%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

NPL formation

[12]

Speed up NPL resolution in 2Q16 by write-off

Note: 1) % NPL formation and NPL resolution calculated per total loan+ interbank loan

2) Stated as annualized basis

NPL restructuring activities have been slow during fragile economic growth

NPL resolution, then, was speeded up in Q2 by additional write off of NPL (with 100% provisioned)

amounted to THB2.9 billion and NPL sale amounted to THB167 million

If the Bank did not write-off and sell NPLs, NPL resolution would be at 1.23%.

Therefore TMB took a cautious step in write-off NPL

Consequently, NPL ratio dropped to 2.87%

If stripping out write-off

1.23%

[13]

NPL

19,779 mn

Special Mention

Loan

19,408 mn

Pass Loan 668bn (1)

NPL

formation

2.08% p.a.

NPL Resolution

3.02% p.a.

2 nd quarter

ended June-16

(Not to scale)

NPL resolution

Restructure

NPL Sale

NPL write-off

Pay-off and close

account

Normal = 92.7%

Rescheduled = 0.5%

Restructured = 1.2%

TMB’s loan portfolio

P (94.33%)

SM(2.80%)

NPL(2.87%)

TMB keeps stable performing loan

portfolio quality with relatively small

restructuring and rescheduling.

The Bank’s SM loans remained relative

low to TMB overall lending portfolio.

TMB has consistently set up

conservative provisions, therefore,

NPL resolution was speed up in 2Q16

by NPL write off and sale

Consequently, NPL ratio dropped to

2.87%

* Loan + interbank loan[14]

NPL Ratio at 2.87% of which majority was SME

TCG

claimable 4.4 bn

NPLs: 19.7 bn

From SME

NPL as of Jun-16 reduced to THB19,779 mn.

or 2.87% of total loans

From total NPLs of THB19.7 bn, THB14.6 bn

was NPLs in SME, of which THB4.4 bn was

claimable from TCG

14.6 bn

Jun-16

[15]

Ensure strong coverage Ratio

Coverage ratio improved to 143%

TMB has consistently maintained conservative

provision to ensure sufficiency and buffer provision

for both performing loan and NPLs

2.9%

of PL

58%

of NPL

Provision set

aside for PL is

equivalent to

Provision set

aside for NPL is

equivalent to

&

[16]

142% 140% 143%

0%

40%

80%

120%

160%

4Q15 1Q16 2Q16

Coverage ratio

TMB took more prudent steps in setting up provision

With the write-off and to continue conservative

provision setting, TMB set up provision of THB2.0 bn

in 2Q16 (credit cost 135 bps)

Provision was THB3.9 bn in 1H16 (credit cost 131 bps)


THB3,736 mn THB3,875 mn +3.7%

136 bps 131 bps -5 bps

Provision expense

Credit cost

923

1,877 1,998

64

128135

0

20

40

60

80

100

120

140

0

500

1,000

1,500

2,000

2,500

4Q15 1Q16 2Q16

Provision expense Provision expense Annualised credit cost

THB million bps

[17]

2Q16 and 1H16 Net profit growth

After provision, net profit was at THB2,151

million, +2.8% QoQ

For 1H16, net profit grew 8.9% YoY

+2.8%


THB3,897 mn THB4,243 mn +8.9%Net profit

[18]

Solid capital base under Basel III

TMB maintained capital base at high level under Basel III requirements

Tier 1 capital increased to 12.5% (entirely Core Tier 1) and total CAR increased to 18.0%.

[19]


Asset quality


AGENDA

[20]

TMB’s Journey and Digital Banking Evolutions

TMB created a strong foundation and faces limited headwind to succeed in digital era

• Built and expanded retail customer base from 500k to 2.3Mn active customers (AF 10% : MI 63% : Mass 27%)(1)

• Built strong customer base in supply chains and SMEs (>300k SME customers)

• Bolstered infrastructure and core banking systems

• Introduced Thailand’s first digital bank MEbyTMB

• Launched TMB TOUCH and redesigned TMB Internet Banking to create Omni-channel experiences

Limited headwind from digital disruptions as TMB

possesses limited physical networks

(ATMs 2,279 : ADMs 514 : Branch 453)(2)

Limited downside of Non-Interest Income reduction

because TMB had disrupted itself and forgone fee income

from transactions

(TMB transaction fee per retail customers of THB 215 vs

Peer of THB 884)(3)

Active digital channel uptake shows 156%(4) growth of new

TMB Internet Banking and TMB TOUCH users since JAN15

TMB to further utilize digital capabilities to provide the

right products to the right customers in the right channels

#TMBDigitalBankingเป็นทุกความเป็นไปได้ เพ่ือให้คุณใช้ชีวิตได้เต็มที่ในแบบที่คุณต้องการ

Internet of Things

Omni

Channel

Multi-

Channel

Integration

E-Banking

*Active digital customers : Active internet banking customers + active mobile banking customers [21]

[22]

Looking Ahead in Digital Banking Era for TMB

Limited negative impacts from digitalization but greater opportunities foreseen

PromptPay, in full adoption, would result in only 1-2% reduction in total fee income

Digital self-service and payments (PromptPay/Debit Cards) will replace assisted service at branch, thus, TMB expects to convert servicing activities into more sales activities (60% sales activities at branch within Y2020) while redeploying the remaining staff to other areas

Estimate sizable operational expense savings from lower cash handling

Lower risk cost from effective data driven predictive analysis

#TMBDigital

Banking

Financial Impacts from Digitalization

Using effective data analytics to transform from one-size-fits-all to targeted offers and sales (Growth in digital leads by 53% in Y2016)

Build and use capability to cross-sell on inbound traffic in each of our channels has already commenced in Y2016

Build and use digital marketing and digital sales to reach new customers (1Mn user sessions per month in 2016)

Automation to convert sales, lower acquisition costs and replace error-sensitive manual processing

MEbyTMB will become a fully digital bank honoring “Do-It-Yourself” philosophy to pass on the benefits to the customers

Leverage on PromptPay to introduce new innovative cash management products in order to capture transaction data between corporate clients and their SME suppliers/retail customers

Convert transaction data into credit applications, develop ‘single working capital platform’ and integrate into supply chain community for potential P2P lending

Enable operational excellence platform by enhancing current TMB TOUCH for multi-currency payment as well as integrating with customer journey to reduce clients’ daily operating workload

Explore Blockchain technology and its applications in banking products such as trade finance

Retail

Banking

Commercial Banking

Bank-wide

Digital banking plays more important role

No. of financial transactions via digital channel has

outpaced transactions via traditional channels and

the trend continues

Product holding and average revenue from digital

customer are higher than total bank average

(Product holding 1.85 vs 1.21)

In May-16, active digital customers growth rate was

156% (since launched TMB mobile banking)

Take up rate, therefore, rise further with digital

customers representing 15% of active digital

customers in May 16

+105.4% YoY

-6.1% YoY

+0.9% YoY

No. of transaction by channels

Financial transactions : Transfer + Bill Payment + ORFT

“Evidence shows digital customers have higher product holding than average”

*Active digital customers : Active internet banking customers + active mobile banking customers

6% 9% 10% 11% 13% 15%% Digital

customer*/ Active customers

+156% (Jan’ -May’16)

[23]

2016 Key financial targets

Key ratios 2015 Actual 1H16 2016 Target

Performing loan growth 9.5% 2.0% YTD 6-8% (Revised)

Deposit growth 12.8% -0.5% YTD 0-2% (Revised)

Net interest margin 3.0% 3.06% 3.0-3.2%

Net fee income growth 36.4% 1.6% 5-10% (Revised)

Cost to income ratio 49.2% 46.7% 46-49%

ROE 12.9% 10.7% 10-12% (Revised)

NPL ratio 2.99% 2.87% Approx. 3.0%

Coverage ratio 142% 143% Approx. 140-145%

[24][24]

TMB Bank Public Company Limited

3000 Phahonyothin Road

Chatuchak, Bangkok 10900

Website: www.tmbbank.com

Disclaimer

This presentation contains some information from other sources, that TMB Bank Public Company Limited does not make any representations

regarding the use, validity, accuracy, or reliability of, or the results of the use of information, data but not limited to, all text, and images (“the Content”)

on this presentation. Some content may contain forward looking statements, that based on management’s view upon the information currently

available to us. These statement are subject to certain risks and uncertainties that could cause the actual results materially differed from what had been

previously stated. The materials in this presentation shall not, and are not intended to, constitute or contain an offer to sell or the solicitation of an offer to buy, any securities of TMB Bank Public Company Limited.

[25]

tmb bank plc....2.08% p.a. npl resolution 3.02% p.a. 2 nd quarter ended june-16 (not to scale) npl...

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