■ CTG’s FY16 net profit grew 19% yoy, and came in 9% above our forecast, as the bank aggressively expanded loans and relaxed provisioning.
■ Provision expenses increased by only 7% last year, despite rising NPLs, which left the loan loss coverage ratio at an uncomfortable level of 102%.
■ CTG’s balance sheet remains under stress, especially capital adequacy and liquidity. Hence, its high net profit growth is unsustainable, in our view.
■ Downgrade to Reduce as share price rallied 19% YTD, largely driven by speculation about foreign ownership limits increase, in our view.