TMB Bank Public Company Limited and its subsidiaries or "TMB" announced today its 2018 financial results which continuously grew from the previous year. Of which, the Bank's Pre-Provision Operating Profit (PPOP) was posted at THB30,540 mn, representing 54.7% growth YoY, mainly supported by higher Non-NII as the Bank recognized gain from the Eastspring deal along with lower operating expenses. While closely monitoring asset quality, TMB prepared for IFRS 9 by setting up provision of THB7,000 mn in addition to the normal level. In total, the Bank, provided THB16,100 mn of provision in 2018. Consequently, the coverage ratio which reflected the Bank's loan loss absorption ability, increased to 152% from 143% in previous year. Meanwhile, NPL ratio is posted at 2.76%. After provision expenses and taxes, TMB reported net profit of THB11,601 mn, an increase of 33.6% YoY.
Mr. Piti Tantakasem, CEO of TMB, said "Thai banking industry went through series of fundamental shifts in 2018, ranging from digital transaction fee wavier earlier in the year to the development of new digital banking services by various banks. It was delighting to see such changes as, at the end of the day, customers win. For TMB, we have waived transaction fees 9 years ago and in fact, we have enhanced our proposition further by offering customers more benefits with "Get MORE with TMB" concept.
"With this concept and service improvement across all channels that aim to uplift customer experience and to serve customers' digital lifestyle, TMB could expand active retail customer base to 2.6 mn in 2018 from 2.5 mn customers in the previous year. Of which, the proportion of digital active customers rose to 48% from 35%. Meanwhile, deposit rose further by 6.2% YoY to THB650 bn. This was attributable to the continuous growth in all flagship products, led by TMB No Fixed (+14%) and TMB All Free (+4%), the pair that answer retail customers both "for save" and "for use" purposes. This was followed by an increase from commercial transactional deposit, backed by TMB One Bank (+15%). ME SAVE, the digital saving product by ME by TMB also continued to grow (+12%). In 2018, ME by TMB has strengthened its leading position in digital banking by offering customers electronic identity verification or e-KYC at the time of account opening. Furthermore, ME SURE was launched as the industry's first life insurance self-adopted end-to-end digital offering."
In terms of loan, the Bank has emphasized on prudent lending to ensure quality growth of portfolio. Loan grew by 6.6% from last year to THB686 bn, driven by growth from retail segment (+18%)-especially mortgage (+20%). With this, the Bank has focused on low-risk mortgage lending, in line with the Bank of Thailand's guideline. Commercial loans continued to grow as well, mainly due to large corporate loan (+7%)-particularly Trade Finance (+18%). At the meantime, small SME loan gradually improved at growth of 1.7%YoY.
Due to gradual recovery from the Small-SME loan, Net Interest Margin or NIM, therefore, was declined to 2.94% from 3.13%. Thus, Net Interest Income or NII decreased by 1.0% to THB24,497 mn. However, Non-Interest Income or Non-NII rose up by 85.3% YoY to THB 23,545mn, boosted by the recognition of THB12 bn gain from a deal to sell 65% stakes of TMB Asset Management Co., Ltd. (TMBAM) to form a partnership with Eastspring Investment (Singapore) in 3Q18. This is to uplift in mutual fund offerings in line with TMB Open Architecture strategy. Hence, the Bank's total operating income was reported at THB48,042 mn, while operating expenses was posted at THB17,475 mn, down by 1.8% YoY. Overall, PPOP was reported at THB 30,540 mn, up by 54.7%YoY.
With higher PPOP, the Bank set higher provision in preparation for IFRS 9 and prudent qualitative loan downgrade. As a result, the Bank set up an additional THB7,000 mn of provision from its normal level. The total provision of the year was THB16,100 mn, compared to THB8,915 mn from the previous year. After provision and taxes, TMB reported net profit of THB11,601 mn, an increase of 33.6%YoY.
Mr. Piti added, "Setting up higher provision in 2018 was not a concern, as this was meant to reflect the Bank's emphasis on prudent management in tandem with the preparation for IFRS 9, not because of weakening asset quality. In fact, asset quality remained stable and gradually improved. With higher provision and NPL ratio of 2.76%, the coverage ratio rose to 152% from 143% in prior year, reflecting better risk absorption ability. Capital Adequacy Ratio (CAR) and Tier 1 were at 17.5% and 13.6%, well-above the Bank of Thailand's minimum requirement of CAR at 10.375% and Tier 1 at 7.875%, respectively. All of our prudent efforts in 2018 aim to lay strong foundation for the year of 2019, in which the Bank aims to further expand its customer base through 'Get MORE with TMB'."