TMB Bank : Management Discussion and Analysis Quarter 1 and 3-month period ending 31 Mar 2021 (Unreviewed)

Management Discussion and Analysis

For the 1st quarter and 3-month period ended 31 March 2021

(Unreviewed financial statements)

TMB Bank Public Company Limited

3000 Phahon Yothin Road

Chom Pon, Chatuchak, Bangkok 10900

Website:www.tmbbank.com

Investor Relations

Email:[e-mail]

Management Discussion and Analysis

Executive summary: Economic review & outlook

Thai economy in 1Q21: Regarding the recurrent wave of COVID-19 infection in December 2020, the growth of economic activities decelerated from the expected pace of continuous rebound even with much less strict outbreak controlling measures compared to the enforced nationwide lockdown in the first outbreak last year. Private consumption accordingly contracted from the drags of weak employment situation, uncertain personal incomes and declining consumer confidence. Despite these fragile conditions, there were still supports from government's stimulus measures such as co-payment subsidy program and financial aid scheme, totally amounting to more than 2,000 billion baht, which helped sustain households' consumptions. Meanwhile, tourism sector overall remained in contraction due to the prolonging cross-border travel restriction and the decline in domestic tourism at the beginning of the year. With the rebounds of trading partners' economies particularly the United states and China, Thai merchandise export was, on the other hand, the only economic growth driver with a clear positive growth figure of export values excluding gold of 5% YoY in the first two months, registering a three consecutive- month of positive growth value. The leading categories of exported merchandises could be found in automobile, electrical appliances and electronics. About private investment, it rebounded in line with export recovery and an improved business sentiment after the second wave of infection being under control in February. Although with the lesser impact of new outbreak than the first wave in last year, Thai economy in the first quarter is estimated to continuously contract compared to the sameperiod of 2020 and to have negative momentum from previous quarter.

Financial market & banking industry: The Monetary Policy Committee (MPC) decided to maintain the policy rate at 0.50% to support the recovery of Thai economy. Even though Thai economy were affected by a new round of Covid-19 outbreak, the impact was limited only within some industries. Bank of Thailand continued to provide financial assistance specifically for those targeted individuals and businesses, mostly are SMEs, through soft loans. Overall, financial condition would remain accommodative to support economic recovery through 2021. The decision to keep policy rate unchanged in the first quarter led to the deposit and lending rate remaining at the same rate as in the fourth quarter. Regarding Thai baht, it was on average at 30.29 baht per US dollar in the first quarter, appreciating by 1.1% compared to the average of 30.62 baht per US dollar in the previous quarter. Thai Baht continued to appreciate from last year in that it reached the level of below 30 baht per US dollar in January. However, rising U.S. government bond yield caused dollar index to appreciate, causing Thai Baht to weaken

in March. In the meantime, Thai bath's volatility remained moderate. Regarding commercial banking, total loans at the end of

February 2021 grew by 5.7% compared to the same period last year (YoY) but decreased by 0.3% from the end of year 2020(YTD). On the other hand, deposits expanded by 10.4% YoY or 0.0% (YTD) from saving and time deposits last year.

Economic outlook for 2Q21: Approaching the second quarter with a third wave of domestic outbreak, Thailand's economy thus turns to a consecutive slowdown from the first quarter even with no strict nationwide lockdown and announced curfew. The corresponding impacts could be clearly seen in tourism sector especially a domestic travelling industry, which has just gained recovery path recently, and in potentially a delay in border-reopening plan to foreign tourists in the second half of the

year. In spite of recurring drags, the remaining growth driver is government's continuous stimulus measures, via both extending current program's period and launching a new one, such as co-payment scheme, cash handouts of 'we travel together' and a new subsidy scheme of 'Section 33 we love each other', which lead to maintain private consumption growth.

In term of public investment, the disbursement of investment budget worth 4,000 billion baht is expected to decelerate due to transfer parts of the budget to the consumption stimulus packages and the Covid19 preventive measures. About

merchandise exports, it is expected to continue its recovery in line with the rebound of trading partners' economies,

particularly the United states which has recently approved a big economic stimulus package, yielding positive impact on other trading partners. Therefore, Thai economy in the second quarter is projected to have a negative momentum from the previous quarter but would express a positive figure compared to the same period last year due to low base effect in 2020. For financial market, the policy rate is expected to remain at 0.5% in accordance with ongoing economic recovery under uncertainties. Thai baht is forecasted to depreciate from the first quarter due to US dollar's appreciation and Covid-19 situation in Thailand. Thaibaht is estimated to move within the range of 30.5-32.0baht per US dollar.

Research by TMB Analytics [e-mail]

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Summary of TMB relief scheme for customers who are affected by COVID-19

At the onset of the COVID-19 pandemic, the Bank has provided its relief measure for all customer segments in the form of payment holiday for principal and interest, a reduction of interest payment, extension of installment period, and soft loan facilities. In Jan 2021, BOT announced the extension of relief measures for retail borrowers, medium enterprise and small SMEs, As a result, approximate 14% of total loan portfolio was under the relief program as of Mar 2021 which relatively stable from the end of 2020 but decreased from 40% as of Jun 20. For those customers remaining in the relief program, most of them were in the 2nd phrase of relief measures. As of Mar 2021, commercial customer under forbearance accounted for 19% of total commercial loans and retail customers accounted for 10% of total retail loans respectively. According to the new round of pandemic outbreak, TMB continues to be vigilant and keeps monitoring customers to ensure the Bank's asset quality as wellas support customers through pre-emptivedebt restructuring to ensure that customers can recover in the long run.

			Relief program "Tang Lak round 2"
	Retail: TMB extends the relief program for customer until 30 Jun 2021, in response to BOT announcement
	Auto loan	•	Reduce installment by extending tenure or 3-month debt suspension for the
			principal and interest payment (for new car, used car and cash your car)
		•	Reduce 30% of installment for 6 months and cut interest rate not over 22%
			(for cash your book)
	Mortgage loan	•	6-month grace period of principle payment (Pay only interest) or
		•	Reduce installment to 70% for 6 months or
		•	3-month debt suspension for the principal and interest payment
	Unsecured loan	•	Reduce installment to 70% for 6 months and cut interest rate not over 22%
		•	Lower interest rate for unsecured loan to 25% from 28% per year, effective
			from 1 Aug 2020 (for new application)
	Credit card	•	Convert current outstanding balance to term loan or convert to Installment pay
			plan (IPP) with interest rate not over 12% and maximum 48 tenors
		•	Minimum payment for credit card will be reduced to 5% in 2020-2021, 8% in
			2022 and back to 10% in 2023, effective from 20 Apr 2020 billing cycle
			onwards
		•	Lower interest rate for credit card to 16% from 18% per year, effective from
			1 Aug 2020
	Cash card	•	Convert current outstanding balance to term loan or convert to Installment
			pay plan (IPP) with interest rate not over 22% and maximum 60 tenors
		•	Minimum payment for cash card will be reduced to 3%, effective from 20 Apr
			2020 billing cycle onwards
		•	Lower interest rate for cash card to 25% from 28% per year, effective from
			1 Aug 2020

Commercial: TMB provides the below relief program for customers until 30 June 2021

	SME (Juristic and Non-Juristic)			•	Long-term lending: Reduce the amount of installment payment up to 6 months;
					plus extend installment period up to 15 months from the approve date
				• Overdraft/Working Capital Lending: Convert Overdraft or Working Capital
					lending to 10 years Long Term Lending
	Large corporate
				•	Long-term lending: Suspension for the principal for 3 months from the
					approval date
				•	Overdraft/Working Capital Lending: Convert up to 50% of working capital
					outstanding to 5 years long-term lending

Please findhttps://www.tmbbank.com/page/view/loan-covid19.htmlfor further details

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Summary of the additional BOT's financial measures to support viable business for the post-COVID 19

On 23 March 2021, BOT announced the additional measures with an aim to support viable businesses as that they can remain open, maintain employment and have opportunities to recover themselves for the post-COVID 19. The measures included special loan facility to support viable small and medium enterprises (SMEs) affected by the COVID-19 crisis and debt restructuring through Asset Warehousing with Buy-Back options which provides standardized debt restructuring program for adversely affected borrowers whose businesses require prolonged recovery period. These measures will take effect in early May this year. Moreover, the Bank of Thailand's revised regulation on late payment calculation and interest rate penalty aims to support adversely affected borrowers. The revision will lower debt burden and limit build-up of non- performing loans in the financial system.

Measures		BOT Special loan		Debt restructuring through Asset
				Warehousing (Asset Swap)
Objective	Provide liquidity for business operations as	Strong relief package for affected businesses
	well as for business recovery	with prolonged recovery period
Total credit line	THB 250 bn	THB 100 bn
Period	5 years	3 years with option for 2 years expansion
Customer qualification	Corporate & SME clients (non-listed) with	Borrowers with collaterals prior to 28 Feb 21
	existing credit line not exceeding THB 500 mn	who were not NPL as of 31 Dec 19
Condition	1)	Loan limit	1)	Transfer value
		• Existing customers: not exceeding 30%		Mutually agree between FIs and
		of credit line as of 31 Dec 19 or 28 Feb		borrowers and the borrowers have the
		21, whichever is greater, but not		first rights to repurchase collaterals back
		exceeding 150 THB mn		within 5 years (BOT liquidity support at
		• New customers: not exceeding 20 THB		0.01% to FIs for the value of asset
		mn		transfers)
	2)	Interest rate: Not exceed 5% per annum	2) The repurchase price should not be
		for 5 years, and at 2% in the first 2 years.		higher than the transfer price
		The government will subsidize interest for		(+) carrying cost (1% per annum of
		the first 6 months		transfer price) and maintenance costs
				and other relevant fees
	3)	Loan Guarantee		(-) rental fees received during the period
		• Guarantee period: 10 years		with no additional maintenance costs
		• Compensation rate: not exceeding 40%		shall be charged if the borrower rents the
		of loan portfolio		asset
	4)	TCG Fee: 1.75% per annum, which the	3)	Tax and fee
		government will compensate in total of		• Exempt relevant taxes for both the
		3.5% through TCG mechanism		transfers and the repurchase of the
				assets for original owners
	5)	Other Fees		• Reduce registration fee to 0.01%
		• Mortgage registration fee at 0.01%
		• No business collateral registration fees	4)	NPA accounting: True Sale with holding
				period since end of warehousing contract
			5)	Remaining debt: Debt restructuring /
				consider for special loan

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Summary of TMB's operating performance

At the beginning of 2021, Thai economy started to show improvement in recovery from COVID-19 before the new wave of the pandemic resurged and raised concern over asset quality once again. TMB closely monitored situation and maintained performance efficiency though balance sheet optimization strategy as well as post-merger synergy realization. TMB still grew loans and deposits very selectively to sustain quality of portfolio. Despite low deposit rate environment, TMB's flagship deposit products continued its growth momentum. NII and NIM were softened due to loan yield compression from low rate environment and change in accounting estimates in mortgage portfolio. However, net fee and service income improved from mutual fund and cost saving synergy reflected the lower OPEX. As a result of slow top-line growth, PPOP decreased from the previous quarter. In term of asset quality, the Bank still prudent and setting aside ECL of THB5,480 million whileNPL ratio was in line with the target at 2.75%.

Deposits continued to expand during surplus liquidity in the market, boosted by CASA and No-Fixed:TMB continued to build strong deposit franchise as well as proactively optimize deposit mix by running high-costdeposit with CASA and quality-hybriddeposits. As of March 2021, total deposit rose by 0.8% YTD to THB1,384 billion. Retail flagship products showed a positive momentum, led by No-Fixed(+6.8% YTD) and TMB All Free (+4.8% YTD) while Ultra-savingdeclined by 7.4% YTD form TBANK's customer migration. TD and Certificate Deposit significantly dropped by 16.9% YTD, in line with balance sheet optimization. As aresult, retail deposit represented 73% of total deposit as of Mar 2021.

Maintained quality loan portfolio amidst unstable economic recovery: TMB continued to grow loan very selectively against economic headwinds from the resurgence of COVID-19.Total loan, therefore, declined by 0.9% YTD to THB1,380 billion as of March 2021. Corporate loans contracted by 1.8% YTD from large corporate repayment while SMEs loan was relatively flat. Retail loans decreased by 0.5% YTD backed by hire purchase which slightly dropped by 0.4% YTD due to seasonality while unsecured loans and credit card remained contraction. Nevertheless, mortgage continued its moderate growth pace with 0.6% YTD against unfavorable business environment. As the Bank pursues its balance sheet optimization strategy to run down low yield portfolio and improve loan quality against fragile economic recovery, loan portfolio was well-diversifiedand shifted to retail lending, given retail loansrepresented 56% of total portfolio and around 91% of retail loans are secured lending.

Softened top-line growth amid economic downturn from the pandemic: TMB reported 1Q21 net interest income of THB12,872 million, decreasing by 4.8% QoQ, due primarily to lower yield on loan and loan volume while balance sheet optimization led to well- managed cost of funds. Therefore, NIM stood to 3.00% in 1Q21, which declined by 6 bps from the previous quarter. NIM reduction in this quarter was essentially because of loan yield compression and partly from annual review of mortgage portfolio accounting estimates change in Effective Interest Rate (EIR) to reflect competition and payment behavior of customer, offsetting lower cost of deposit from balance sheet optimization. Although Non-NIIdeclined by 7.6% QoQ to THB3,971 million, net fees and service income continued its positive momentum from mutual fund fee given good market sentiment at the beginning of the year and IPO launches in the quarter. However, bancassurance fee was slowdown from seasonal effect. Total operating income, therefore, dropped by 5.5%QoQ to THB16,844 million in 1Q21.

PPOP compression dragged by challenging revenue growth while OPEX well-controlled:Given operating income was pressured by the deteriorating in economic factors from COVID-19impact, operating expenses were well-managedwhich dropped by 2.0% QoQ as post-mergercost saving continued to be realized. Cost-to-incomeexclude purchase price allocation (PPA) impact reported at 46% which in line with the 2021 guidance. After the integration process ends, the Bank will benefit from cost synergy and C/I ratiowould improve in long run. As of 1Q21, Pre-ProvisionOperating Profit (PPOP), dropped by 9.3% QoQ to THB8,898 million.

Maintained prudent approach over asset quality against unstable forward-lookingCOVID-19 situation: The Bank remained vigilant and set up expected credit loss (ECL) amounting to THB5,480 million in 1Q21 compared to THB8,237 million in 4Q20. The provision reflects Bank's stringent forward-lookingExpected Credit Loss (ECL) models which taking potential impacts on our loan portfolio from relief measures into account. In 1Q21, stage 3 loans totaled THB43,400 million, representing NPL ratio of 2.75%. Therise in NPL was in line with the guidance and partly from slow natural resolution in this quarter.

After provision and tax, TMB reported THB2,782 million of net profit in 1Q21 which increased by 125.3% QoQ and represented a return on equity (ROE) of 5.5%.

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