TISCO Financial Group: High dividend yield to support share price
- 2Q25 earnings came in at THB1.6bn (-6.2% y/y, flat q/q), beating expectations on lower-than-expected C/I ratio
- Operating cost control helped support bottom line
- Quarterly earnings to decline both y/y and q/q for the remainder of FY25F from credit cost normalisation
- Maintain HOLD with a TP of THB108
Related Stories
The y/y decrease was due to lower net interest income (NII) (from net-interest margin [NIM] contraction), lower non-NII (from lower gains on financial instrument designated at fair value through profit or loss [FVTPL]), and higher expected credit loss (ECL) as the bank is in the process of credit cost normalisation, as well as to cushion against economic uncertainties. Meanwhile, the q/q performance was driven by higher non-NII (from gains on financial instrument designated at FVTPL) and lower operating expenses (OPEX) but was offset by higher ECL.
Nonetheless, its pre-provision operating profit (PPOP) increased 0.7% y/y and 6.8% q/q to THB2.6bn. The y/y increase was attributed to lower OPEX, while the q/q increase was thanks to higher non-NII and lower OPEX.
1H25 earnings accounted for 51% of our full-year forecast.
Loans expanded 1.1% y/y, 1.5% q/q, and 1.4% YTD in 2Q25. The q/q increase was driven by increases in loans from every sector, while the YTD expansion was driven solely by an increase in corporate loans.
Specifically, retail loans (67% of total loans) increased 0.2% q/q, driven mainly by hire purchase (HP) loans (42% of the total loans) (+0.6% q/q). New-car HP expanded 0.2% q/q, thanks to an improvement in TISCO’s car penetration rate for 5M25 to 5.5% (vs. 4.6% for 5M24 and 4.9% for 2024), while used-car and motorcycle HP also increased 1.4% and 3.3%, respectively, q/q.
In the meantime, auto cash loans (18% of total loans) declined 0.4% q/q, following TISCO’s cautious and prudent loan underwriting, high household debt, and fragile economic conditions. Housing loans (3% of total loans) continued to decrease by 3.9% q/q.
SME loans (6% of total loans) increased 2.4% q/q from an increase in car inventory financing. Corporate loans (28% of total loans) increased 5.9% q/q from utilities and services sector, as well as real estate and construction sector.
Asset quality remained manageable. NPLs increased 1.4% q/q to THB5.7bn, driven mainly by increases in NPLs from auto cash loans and HP loans following the slow economic growth and high household debt problem. However, such increase was within the company’s projected range. Meanwhile, NPL ratio declined to 2.41% at end-2Q25 (vs. 2.42% at end-1Q25), thanks to a larger loan base.
TISCO set aside an ECL of THB559mn (+39.5% y/y; +44.9% q/q) or a credit cost of 99bps in 2Q25 (vs. 69bps in 1Q25), in line with its plan to step up credit cost to a normalised level in 2025, as well as to cushion against economic uncertainties. Coverage ratio edged up to 155% at end-2Q25 (vs. 154% at end-1Q25).
Strong capital position to support future dividend payment. At end-2Q25, its Tier 1 capital remained high at 17.2%, while its capital adequacy ratio (CAR) was 19.1%. With TISCO’s strong capital position and its capital management policy to optimise ROE, we expect a high dividend payout from the company from its FY25F operations to continue.
Key highlights for 2Q25 results:
i) NIM declined on lower yield. Approx. 30% of TISCO’s loans are priced at floating rates and are thus negatively affected by the policy rate cuts in Oct 2024, Feb 2025, and Apr 2025. Meanwhile, the interest income from loans under the “You Fight, We Help” debt restructuring programme must be foregone during the programme period, implying lower loan yield for that respective period. These two factors pressured yield and NIM in 2Q25 and will continue to do so at least over the next few quarters.
Note that the foregone interest income from the “You Fight, We Help” programme was somewhat (around 40-50%) compensated by the accrued other income from FIDF fee savings according to the conditions specified by the programme.
The number of TISCO’s eligible clients for the programme was approx. 6% of its total loan portfolio, amounting to c.THB13bn. As of Jun 2025, the number of registered clients was about 40% of eligible clients (vs. 32% as of Mar 2025), amounting to c.THB5bn. So far, about 80% of the registered clients (amounting to c.THB4bn) have successfully restructured their contracts (vs. 60% as of Mar 2025). Note that the registration deadline has been extended to 30 Sep 2025 (vs. 30 Apr 2025 earlier).
Furthermore, with unpromising economic conditions, TISCO has shifted its portfolio toward lower-risk secured retail loans, i.e., new-car HP, and away from higher-risk ones, i.e., auto cash loans, while continuing expand used-car ad motorcycle HP amid the interest rate downcycle. Such strategy also impacted yield in 2Q25.
In the meantime, management expects its cost of funds to gradually reprice (i.e., decline), probably over 6-12 months, following the policy rate cuts mentioned above. This factor should help cushion NIM from declining yield.
Note that management expects at least one more rate cut in 2H25F, implying lower yield and lower cost of funds in the coming quarters.
ii) Operating cost control helped support bottom line. OPEX decreased 7.0% y/y and 2.3% q/q in 2Q25, while C/I ratio declined to 45.7% (vs. 47.1% in 2Q24 and 47.9% in 1Q25). The decline was thanks to the company’s effective operating cost control, especially on staff and IT expenses.
Meanwhile, as of Jun 2025, there were 808 Somwang branches, with no new branches opened in 1H25. This reflects that TISCO’s strategy has shifted to cost management and efficiency improvement at Somwang branches, instead of adding more numbers.
With that, we expect TISCO’s C/I ratio to decline in FY25F.
iii) On course for credit cost normalisation. TISCO plans for its credit cost to step up to a normalised level of c.100bps in FY25F, in line with its loan portfolio, which has shifted towards high-yield loans. Meanwhile, with a higher-risk portfolio, its NPL ratio is expected to also increase in FY25F. Management expects coverage ratio to remain at 150% +/- in FY25F, alongside the path of credit cost normalisation and to replenish its declined excess reserve.
Quarterly earnings to decline both y/y and q/q for the remainder of FY25F. We believe 2025 will be another challenging year for TISCO, as top line is expected to be weaker, while credit cost normalisation pressures bottom line.
While loan growth may be stronger than FY24, NIM is likely to decline, resulting in lower NII in FY25F. The decline in NIM should be due to lower yields from selective lending strategy, while cost of funds is likely gradually repricing downwards (following the policy rate cuts in Oct 2024, Feb 2025, and Apr 2025).
Fee income and non-NII growth remain challenging, depending on the economic and capital market conditions. Meanwhile, we expect its C/I ratio to decline, following the company’s operating cost control.
In sum, on a quarterly basis, we expect TISCO’s earnings to be softer y/y and q/q over the course of FY25F, due to lower top line and higher credit costs.
Maintain HOLD with TP of THB108. Our TP is based on 2.0x FY25F P/BV, i.e., 1SD above its LT average P/BV. We believe TISCO’s premium valuation is justified by its highest ROE among its banking peers. While we estimate its FY25F earnings growth (-7.3% y/y) to be weaker than the sector average (flat y/y), its dividend yield remains attractive at 7.8% and should continue to support TISCO’s share price. Our HOLD rating stands.
| FY Dec | 2Q2024 | 1Q2025 | 2Q2025 | % chg y/y | % chg q/q |
|---|---|---|---|---|---|
| Net Interest Income | 3,387 | 3,328 | 3,328 | (1.7) | 0.0 |
| Non-Interest Income | 1,543 | 1,342 | 1,457 | (5.6) | 8.6 |
| Operating Income | 4,931 | 4,671 | 4,786 | (2.9) | 2.5 |
| Operating Expenses | (2,356) | (2,242) | (2,190) | (7.0) | (2.3) |
| Pre-Provision Profit | 2,575 | 2,429 | 2,596 | 0.8 | 6.9 |
| Provisions | (401) | (386) | (559) | 39.5 | 44.9 |
| Associates | 6.79 | 9.48 | 8.17 | 20.4 | (13.8) |
| Exceptionals | nm | ||||
| Pretax Profit | 2,181 | 2,052 | 2,045 | (6.2) | (0.4) |
| Taxation | (428) | (409) | (402) | (6.2) | (1.8) |
| Minority Interests | (0.12) | (0.10) | (0.10) | 11.4 | 2.0 |
| Net Profit | 1,753 | 1,643 | 1,644 | (6.2) | 0.0 |
| Growth(%) | |||||
| Net Interest Income Gth | (0.2) | (2.1) | 0.0 | ||
| Net Profit Gth | 1.2 | (3.4) | 0.0 |
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVTH.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.
There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBS Bank Ltd, DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report has been prepared by a personnel of DBS Bank, who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited (''DBS HK''), a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Commission, Thailand. For any query regarding the materials herein, please contact Chanpen Sirithanarattanakul at [email protected] |
United Kingdom | This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBSVTH. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG | SINGAPORE |
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: William Simadiputra DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected] | THAILAND |