TISCO to Pay Dividends at Higher than 50%, Insisting Payout Doesn’t Breach BOT’s Rules

TISCO announced that the bank would offer a dividend distribution to shareholders of more than 50% of its net profit and affirmed that the move would not violate the Bank of Thailand’s regulations. Moreover, the bank asserted that its provision in 2021 will be lower. Analysts estimated TISCO to offer ฿4.50/share dividend payment, representing a 60% distribution from its net profit. The payment would increase to 7.0-7.50 baht per share this year.

 

Mr. Suthas Ruangmanamongkol, Chairman of Executive Board of Tisco Financial Group Public Company Limited (TISCO), revealed that the TISCO is allowed to offer dividends of more than 50% of the company’s net profit and it will not breach BOT’s dividend payment measures that permits financial institutions to pay dividends for the year 2020 not exceeding last year payout ratio and 50% of this year’s net profit.

 

“TISCO has set up several affiliated companies under TISCO group such as securities company, asset management company, leasing company, etc. and all those subsidiaries, still, are allowed to pay dividends at the rate of more than 50% of their earnings as they were not covered in BOT’s dividend payment measures” said Mr. Suthas.

 

As Tier 1 Capital and Tier 2 Capital ratios of TISCO now stood at 18.1% and 4.7%, respectively, which remained solid and higher than the minimum requirement, there is no necessity for TISCO to issue a bond to increase the company’s liquidity. Also, the capital adequacy ratio (BIS ratio) is still strong, currently stood at 22.8%, remaining higher than 11.0% required by the Bank of Thailand.   

 

For the non-performing loans (NPL), Mr. Suthas stated that TISCO estimated NPL in 2021 has a tendency to increase compared to a year ago due to an uncertainty in coronavirus vaccine and pandemic resurgence, projecting NPL to grow in the range of 3-3.5%. 

 

A surge in NPL will not cause any significant concerns to TISCO as the company considered to increase the ECL by 3x to cushion against potential risk arising from ongoing uncertainties. Moreover, TISCO is already to revise the ECL in case NPLs move higher the projected frame. 

 

Maybank Kim Eng (Maybank) has upgraded TISCO’s EPS in 2021-2025 by 5% to reflect a higher NIM and ECL, while expected 2021-22 performance to grow by 9-11%. Maybank estimated TISCO’s dividend payment at ฿4.50/share based on TISCO’s payout ratio at 60%, above BOT’s dividend payment regulations, as the measures were not cover the company’s subsidiaries, in order to reduce the capital surplus, along with boost return on average equity (ROAE)

 

KTBST Securities reiterated a “BUY” rating on TISCO but raise the target price to ฿105.00/share from ฿90.00/share and its 2021E PBV multiples to 1.95x (+1.0 SD above its 10-yr average) from 1.75x (+0.5 SD). 

 

KTBST was positive about TISCO’s 4Q20 earnings outlook, as the NPL ratio decreased to 2.5% from 2.63% in 3Q20, although earnings results came in as expected. Additionally, the moratorium loan reduced to 2 % of total loan from 20% in the same periods, and 9 0 % have resumed their payment routines, which was well above the sector’s average level of 70% . 

 

The analyst upgraded the 2021E net profit forecast by 6.4%, as KTBST revised up NIM estimate to 4.6% from 4.4% earlier given matured senior debentures and cut our credit cost estimate to 112 bps from 120 bps to reflect higher loan-loss provision in 4Q20.

 

TISCO’s share price outperformed the SET Index by 12% in the three-month timeframe. KTBST saw a low downside risk of setting aside unusually high loan-loss provision, while NPL remains in a good shape. Unless the Bank of Thailand imposes regulations on dividend payment for 2021 earnings performance, TISCO should pay a high dividend yield of 7%.