TMB Bank Plc. Performance and Transformation Journey - Investor Presentation, NDR Singapore - ttb
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TMB Bank Plc. Performance and Transformation Journey Investor Presentation, NDR Singapore March 2017
AGENDA
TMB’s journey and 2016 performance
Asset quality
2017 Target
[2]“Be the most advocated transactional bank in the country”
Aligning strategy to TMB Aspiration for the Future with key digital enablers
Strategic intents
Digital enabler III
Continue
Enhancing digital
Quality
Capabilities
Deposit
Transactional Recurring
Banking Non-interest
Excellence Income
Digital enabler I
Build Brand
Digital enabler IV
through Customer Customer Foster Innovations
Experience Understanding and Find Right
Partnerships
Optimized Cost
Capital Efficiency
Utilization
High
Performance
Digital enabler II
Employ
Build agile
Digital enabler V
effective use of and Empowered
Organization organization and
data analytics
instill innovation
culture
[3]Growing quality deposits through Deposit-Led Strategy
Since 2012, Our key strategy was deposit-led strategy which keep our Key products of transactional deposit balance(1) (THB mn)
funding cost competitive and sustain NIM at healthy level. This (1)(THB Bn)free and TMB One bank
TMB All
development led to a key action in acquiring quality deposits namely, (low cost deposit)
93,964 93,430
transactional deposits.
65,397
Growing transactional deposits resulted in strategic shift in deposit mix
to more stable and low cost of deposits 46,556
As a results, deposit cost has improved to match top peers 29,778
% Transactional deposit/total deposit rose to 40% in 2016
FY2012 FY2013 FY2014 FY2015 FY2016
Deposit Mix 645.3
Cost of deposits (Included DPA) TMB
(THB bn) 572.4 599.2 Avg. 4 largest banks
2.50% 2.1% 2.2%
496.4 529.7 26.8% 2.1%
19.6% 2.0%
30.7%
2.00% 1.8%
Fixed 37.6%
35.0% 40.6% 2.1%
36.2% 1.5% 2.1% 1.6%
31.5%
1.9% 1.8%
No Fixed 1.50%
24.6% 28.1% 1.7%
1.5%
Saving 28.8% 26.9% 31.4%
29.1% 27.4% 1.00% 1.2%
Current
11.3% 7.0% 9.0% 10.1% 8.4%
0.50%
FY2012 FY2013 FY2014 FY2015 FY2016
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
% Txn deposit/ total deposit 40% 34% 37% 38% 40%
Note: 4 largest banks - BBL, KBANK, KTB, SCB
% Retail deposit 66% 69% 65% 67% 68%
[4]Acquire transactional deposits lead to customer understanding
# New deposit accounts from flagship transactional deposit How will we grow transactional deposit?
Growth By acquiring transactional deposit, TMB has the opportunity to better
*All Free product (no. of account) understand customers need and pains in order to offer the best
financial solutions for customers to make the most of their lives.
7%
1 2 3
Simplify account Provide convenient PromptPay Payroll
96% 485,332 solution for customer (Eliminate hurdle to
opening process
454,393 switch primary bank)
22% Online opening account Provide transactional To acquire corporate
(2nd deposit product) convenience that employee
outweigh lower saving
274%
232,283 interest rate
189,920
Offer superior benefits.
“The more you use, the
more you benefit”
50,758
From data analytics view: other than gaining transactional deposits,
FY2012 FY2013 FY2014 FY2015 FY2016
TMB can in turn redeploy transactional history of “Propensity to buy”
and “Moment of truth” to match with customers need for the next
best cross-selling.
Digital Enabler I
Digital Enabler II
Digital Enabler III
[5]Optimizing loan mix for better risk-adjusted return
Performing loan breakdown
575.8 In 2017: Focusing on resume loan growth with better risk-adjusted return :
(THB billion) 560.3 SME and retail loans.
512.3
477.1 20% 26%
430.6 18%
Retail 17%
18% 17% 15%
16% Build on
20% Customer penetration Focus on Efficiency
Small SME 15% 19% big data analytics
22% 19%
16% 1 3
Medium sized SME 17% 2
46% 46% 43%
Corporate 50% 39% I. Propensity
1. to buy data I. 1. more exiting
Penetrating I. 1.
Continuously improve end-to-
from credit card TMB customers end process e.g. process
transactions. automation, improving
FY2012 FY2013 FY2014 FY2015 FY2016 turnaround time etc.
Introducing Data Analytics
Net interest margin (NIM) Avg. 4 largest banks
II. 2.
e.g. risk-based pricing, A- II.
Focusing on keep good
2.
Mortgage loan take up rate(*)
4.0%
TMB Score, Behavioral Score and
customers
In 2016 : 84%
Transactional score From 70% in 2015
3.5%
3.1% 3.0% 3.2%
3.1%
3.0% Increase capacity utilization
3.0%
3.1% II. 2. mobile sale and
of branch,
2.9% 3.0% 3.0% RM
2.5%
2.7%
2.0%
Note: 4 largest banks - BBL, KBANK, KTB, SCB (*) %Take up after loan approval
1.5%
FY2012 FY2013 FY2014 FY2015 FY2016 Digital Enabler I
With shift in loan mix toward better risk-adjusted return with SME Digital Enabler II
and retail loans and well-managed funding cost, TMB could
Digital Enabler III
narrowed down NIM gap with the 4-largest banks
[6]Growing Transactional Banking comes with better fee income
Net fee and service income (THB mn.)
+14.3% CAGR
%Growth16’ TMB disrupted ourselves by forgoing cross region and
7,821 7,997 +2.2%
other hidden fees since 2012 when we first launched No
30% BA +23%
5,579 5,734 Fee to answer to the customers’ need for transactional
Bancassurance fee
4,690
Mutual fund fee
22% MF flat banking excellence
23%
Trade finance fee 9% 4% TF +14%
6%
4%
8%
LG +9%
LG Fee 12% Loan related -32%
19%
Loan related fee 26%
37%
Others
FY2012 FY2013 FY2014 FY2015 FY2016
Fee The foregone transactional fees were well-compensated
1.0% 1.1% 1.1% 1.3% 1.3%
avg. earning
assets by an increase in fees from our strategic fee products as a
Fee breakdown (THB mn.)
result of enlarged customer base and improving cross-
%growth
1H16 2H16 HoH selling ability
Bancassurance 1,069 1,325 +24.0%
Mutual fund 694 1,054 +51.9%
Trade finance 182 173 -5.3%
LG Fee 236 256 +8.2%
Loan related fee 548 386 -29.7%
Others 1,028 1,046 +1.7%
Remarks: Fee/ avg.earning assets calculated by (Net Fee + Capital market)/
Total Net Fee 3,758 4,239 +12.8% avg.earning assets
[7]Fee income opportunity from underserved customers
Sales Performance by Channel
% percentage change of service
Sales Performance by Channel
transaction by channels in 2016 Increase service levels
and efficiency
Sales Transaction
110% (Million)
5.0
Double the size of contact center
4.5
4.0 Breakdown 84% 9% 2% 5%
3.5
2016
Continue to deliver better customer
3.0 experience with “Call Me Now”
2.5 2.07
1.73
Channel
2.0
strategy Utilize digital channels to decrease
branch operational traffic and focus
1.5
1.0
0.19 0.11
more on sales
2%
0.5
0.04
-
-7%
Overall Branch Contact
Center
Direct
Online Sales
Terminal
Offer seamless experience for
Branch ATM/ADM Digital customers anytime across channels
(Omni-channel experience)
Digital Enabler I
Digital Enabler II
Digital Enabler III
[8]Growing revenue across all channels
2015 2016 Proportion of revenue by channel
Improve our seamless services (Omni-channel)
Why waiting? Better serve customer Offer right products &
93% No need to wait with experience services
90%
Fulfill customers’
“Call Me Now” More Contactable needs
5 min 75%
99%
Call Back period reduced from Improved to 99% from 75% 26% increase in success case
2-3 days to 5 minutes (i.e. Credit card)
3.4% Search for product information easily through all channels;
3.3%
2.7% 1.8%
1.8% 1.4%
1.5%
0.9% Smart phone Website
Computer
www.TMBbank.com
Branch Contact center Digital ATM Omni
Internet Banking
Facebook
Growth 16’ 12% 98% 121% 13% 48%
*Our focus in 2017 Digital Enabler I
Digital Enabler II
Digital Enabler III
[9]Improving efficiency resulted in lower cost to income ratio
Operating income and expenses TMB strategic move for cost management
Total operating income (THB million)
Total operating expenses TMB has reduced portion of fixed cost and increased variable cost base,
+10.0% CAGR
40,000
so the Bank can manage cost more efficiently.
35,108
35,000 33,298
29,120 29,769 Total costs Increased portion of variable costs to
30,000 effectively manage costs
24,019 43% 46% 47% 50%
25,000 Manageable costs
20,000 +4.9% CAGR Premise & Equipment: Rental fee
17% 19% 20% from leasing
15,000
15,714 16,460 16,438 Personnel expense: Outsource
10,000 13,565 14,803
26% 27%
5,000
27% Business volume related
Business tax
- Personnel expense: Revenue & Profit
FY2012 FY2013 FY2014 FY2015 FY2016 57% 54% 54% 50% sharing schemes
Optimized volume growth to achieve lower
TMB has consistently emphasized in faster revenue cost per transaction
growth over cost growth to result in growing PPOP Personnel expense: Salary base
Premise & Equipment: Bank own
Depreciation
FY2015 FY2016 FY2017 Target
Fixed Business Volume Related Managable
= Total Variable cost
For 2017, TMB focuses on bringing 5 major cost of transactions lower,
potentially bring their cost per transaction down as much as 30%
Digital Enabler III
Digital Enabler V [10]Improving efficiency equals improvement of profitability overtime
Pre-provision operating profit (PPOP)
(THB Billion)
+15.7% CAGR
18
18.6
15 16.9
12 14.4 14.2
9 10.4
6
3
0
FY2012 FY2013 FY2014 FY2015 FY2016
PPOP path ensures the Bank’s operating profitability continues to grow
[11]AGENDA
TMB’s journey and 2016 performance
Asset quality
2017 Target
[12]Reduced NPLs with higher coverage ratio for prudence
Non performing loans & NPL Ratio NPL Coverage Ratio
(THB million) NPL ratio
40,000 36,047
157%
35,000 142% 143%
29,828 140%
30,000
14.3% 113%
25,000 22,103 22,421
20,473
20,000 18,093 17,605
15,000 73%
57%
10,000 5.7% 14,008 From SME with
4.1% 3.9% TCG claimable
5,000 2.9% 3.0% 2.5% of THB3.8 bn
0
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
NPL ratio was actively brought down to 2.53% TMB has been consistently prudent in business
in 2016, from 14.3% in 2010, by dealing with operation, hence, coverage ratio was raised maintained
legacy portfolio and cleaning our balance high at 143% in 2016
sheet to limit future downside risk
NPL as of Dec 16 was THB17.6 bn with the
Thai Corporate Guarantee claimable of
THB3.8bn
[13]NPL formation and NPL resolution were well monitored
NPL resolution
included extra write off
Natural NPL
resolution
NPL formation in 2016 was more driven by restructuring To be conservative and to reduce downside risk in the future, TMB
loan portfolio made an extra write-off amounted to THB12 billion and NPL sale
amounted to THB1.2 billion
New NPL formation in 4Q16 was lower to 0.8% mainly
due to SME portfolio Consequently, NPL ratio dropped to 2.53%,
Note: 1) % NPL formation and NPL resolution calculated per total loan+ interbank loan
2) Stated as annualized basis
[14]TMB maintained stable performing loan portfolio quality with relatively small
180
restructuring and rescheduling loans
160
Pass, SM and NPL loan Loan quality
Dec-15 Jun-16 Sep-16
% of 94.6% 94.3% 94.8% 450 140 Dec-16
total loan
700
THB bn 648 649 659 120
500
P-Normal 92.5%
600
Dec-15 Jun-16 Dec-16 550
100
500 94.8%
600
80
400
300 650
60 Perform-Rescheduled 1.0%
Dec-15 Jun-16 Sep-16 Perform-Restructured 1.2%
0
200
2.9%
40 Chart Title SM-Normal 0.7%
2.8% 2.98%10 2.87% 2.7% SM-Rescheduled 0.2%
2.7%
2.52% SM-Restructured 1.9%*
100 20
20 Included restructured loan under concession rate of THB6.8 bn
(1.0% of total loan)
17
THB bnDec-15 19
Jun-16 19
Dec-16 2030 20 18
Dec-15 Jun-16 Dec-16
0 NPL 2.52%
PASS SM
40
0 NPL
50
Dec-15 Jun-16 Sep-16
Note: Bank-only financial statement Dec-15 Jun-16 Dec-16 Note: Bank-only financial statement
60
700 659
648
SM-Normal SM-Reschedule SM-Restructure
649
70
600
Special mention loan portfolio remained stable, while NPL With higher proportion of NPL formation coming from
portfolio
500 decreased as a result of write offs that have restructured loan, our relatively small restructuring also mitigate
reduced downside risks future downside risk
400
Written-off portfolio was THB22.2 billion as of Dec 16
300
[15]The proactive provision was set high in 2016
Provision expense Annualised credit cost
THB million 172 bps
3,000 151bps
bps
128 135 bps
2,541
2,000
1,998
2,234 The write-off loan was required to set up 100% provision,
64 bps 1,877
1,000 disregarded of collateral value.
923
0
4Q15 1Q16 2Q16 3Q16 4Q16 Additional write-offs together with uncertain economic
outlook, the Bank set relatively high provision of THB2.2
Coverage ratio
billion in 4Q16
142% 140% 143% 142% 143%
4Q15 1Q16 2Q16 3Q16 4Q16
Provision was THB8.6 billion in 2016, equivalent to
FY2015 FY2016 YoY growth (%) credit cost of 146 bps
Provision expense 5,479 mn 8,649 mn 57.9%
TMB aims to maintain coverage ratio at 140-150%
Credit cost 94 bps 146 bps 52 bps
[16]Enhance Small SME portfolio quality by using data analytics
Application
score
Refine “A-score” to
increase prediction
B ehavior
Score
TScore
ransactional
power, aiming for
better customer
screening
Monitor existing customers by analysis of Advanced analytics using big data to observe
Enable bank to credit behavior transactional behavior to efficiently profile
optimal risk-return customers
portfolio profile and Help TMB offer credit limit and facilities
attract good credit where customer needs Can be applied to cross selling optimization,
customers, portfolio monitoring, and collections,
Allow TMB to covering end to end credit life cycle
introduce price-for-
risk approach based Firstly applied to enhance capability of Early
Warning System
TMB continues to improve monitoring and prevention system from traditional approach (Day-Past-Due) to
be based on customer profile, which will timely capture problem of bad accounts
Digital Enabler II
In addition, using data analysis can early identify frauds which will increase bank’s ability to prevent fraud
cases Digital Enabler III
[17]ROE at competitive level that strengthen capital base
ROAE TMB Avg. 4 largest banks
20%
16.4% 17.4%
16.0%
15.1%
15% 12.7% 12.9%
11.3%
14.6% 12.9%
10%
10.2%
9.7%
5%
7.9%
6.6% 2.2%
0%
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
ROAE gaps with peer were closed in the final year of transformation,
putting TMB now as a main competitor in the market, with stronger
capital, higher buffer for loan loss, and healthier risk and profitability
indicators
Tier 1 capital improved from 2015 to 12.8% (entirely Core Tier 1) and
CAR improved to 18.1%
Note: 4 largest banks - BBL, KBANK, KTB, SCB [18]AGENDA
TMB’s journey and 2016 performance
Asset quality
2017 Target
[19]2017 Key financial target
Key ratios 2016 Actual 2017 Target
Performing loan growth 2.8% 8-10%
Deposit growth -7.1% 8-10%
Net interest margin 3.2% 3.2%-3.3%
Net fee income growth 2.2% 10-20%
Cost to income ratio 47% 45-47%
ROE 10.2% 10%-12%
NPL ratio 2.53% 2.3-2.5%
Coverage ratio 143% 140-150%
Credit cost (annualized) 146 bps 140-150 bps
[20]Areas of focus in 2017 to continue our growth
In 2016,
%Txn to Non-Txn Deposit in 2016 was at (40%) comparing to ratio in
Transactional Deposit the beginning of the year at (37%)
Growing transactional deposit +107% increased in #no. of customer account in flagship product,
continues to be a challenge for both namely “All-Free”
commercial and retail banking
In 2016,
Fee Income Fee/EA of 1.3% vs 2.0% Top Peers
While Fee Income has improved
substantially from 2008 level of 0.6% per
EA, fee income capability remains subpar
comparing to Top Peers
Efficiency
While TMB has been more efficient
comparing to C/I of 71% in 2008, efficiency
In 2016,
still present a gap comparing to Top Peers
TMB C/I = 47%; Peers’ C/I = 40%
Note: Fee/EA = Fee per Earning Asset; C/I = Cost to Income Ratio [21]National e-payment (Phase 1 : 2016-2018 Digital Foundation)
MOF and Bank of Thailand
Determine direction and strategic objectives
PromptPay 2 Debit Card eTaxation
1 (EDC expansion) 3 4 Subsidy
System
Go live on Jan 27, 2017 Start deploy EDC expansion
in Mach 17
Enhancing the efficiency in
Money transfer service from Debit-led strategy developed supporting low-income earners
bank account through Citizen E-Personal tax - (Go live)
by the government aimed to with better access to financial
ID or mobile phone number. e-Withholding Tax service
make the Thai payment system
e-Tax Invoice / e-Receipt
more effective, convenient, and
For TMB, customer can e-Filing
secure which enable cashless
transfer to any PromptPay for society
free regardless of no. of times,
and amount to any banks.
ePayment
5
Promotion and PR
Expandding the first batch of
500K terminals by 2016
increasing eventually to 2 Mn Encouraging Thais to take up
Nation e-payment supporting
terminals
by incentivize campaign and
Registered PromptPay
Public awareness
300K in FEB 2017
%PromptPay/ active cust = 13%
Phase 2: 2018-2020
Phase 3: 2021-2025
Inclusion: everyone can reap benefit of digital
Full Transformation
technology [22]TMB Bank Public Company Limited Website: www.tmbbank.com 3000 Phahonyothin Road Chatuchak, Bangkok 10900 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.
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