TMBThanachart Bank Public : Management Discussion and Analysis for the 2nd quarter and 6-month period ended 30 Jun 2022 (Unaudited)

Management Discussion and Analysis

For the 2nd quarter and 6-month period ended 30 June 2022

(Unaudited financial statements)

TMBThanachart Bank Public Company Limited

3000 Phahon Yothin Road

Chom Pon, Chatuchak, Bangkok 10900

Website: www.ttbbank.com

Investor Relations

Email: ir.ttb@ttbbank.com

Management Discussion and Analysis

Executive summary: Economic review & outlook

Thai economy in 2Q22: After Omicron outbreak came under control, Thai economy has retained its recovery momentum and this quarter is the turning point for foreign tourism rebound after easing the border entry restriction. With no-quarantine border entry since 1 June, there was the total number of inbound foreign tourists of 700 thousand persons, mainly from ASEAN and India. For the first six months, foreign tourist figure stands altogether at 2.2 million persons, causing a rebound in services sector. According to domestic economy, private consumption steadily improved in line with better labor market condition. A rapid rise in living costs, particularly energy prices, as reflected in an acceleration of June headline inflation to the 13-year highest record of 7.66%, made private consumption to recover at a gradual pace. Meanwhile, private investment rebounded in accordance with consumption and goods exports. As of May, the value of merchandise export continuously recovered for the 15th-straight month and the growth of export value for the first 5 months of the year registered at 12.9% from the same period last year. The main supports arose from the exports of agricultural products and foods, which have continuously recovered since the beginning of the year. With respect to Thailand's export destination, US, Arab countries and India registered a steady export rebound. This also included European market, which although got hit from Russia-Ukraine war, it still expanded 7.7%. Likely, Chinese market turned to rebound again after ending lockdown period. Against the backdrop of continuous improvement in both external and internal economic sectors, ttb analytics projected that Thai economy in the second quarter will increase by 3% from the same period last year.

Financial market & banking industry: The Monetary Policy Committee (MPC) decided to maintain the policy rate at 0.50%. The committee foresaw Thai economy to expand in 2022 from domestic demand and returning tourists. Inflation is likely to advanced and remains at the high level for a longer period due to high energy costs and transfer pricing. The committee saw a smaller need for extreme accommodative monetary policy in the future. The decision to keep policy rate unchanged in the second quarter led to the deposit and lending rate stood at the same rate as in the first quarter of 2022. Overall, financial condition would remain accommodative from Bank of Thailand financial measures. Regarding Thai baht in the second quarter, it was on average at 34.44 baht per U.S. dollar, depreciating by 4.2% compared to the average of 33.07 baht per US dollar in the previous quarter. Thai Baht has depreciated due to strong dollar trend as the Federal Reserves raised interest rate. In the meantime, Thai bath's volatility dropped as Thai baht moved in line with other Asian currency. Regarding commercial banking, total loans at the end of May 2022 grew by 5.7% compared to the same period last year (YoY) and increased by 1.6% from the end of year 2021 (YTD). On the other hand, deposits expanded by 4.4% YoY or 2.7% (YTD) mainly from saving deposits.

Economic outlook for H2/22: Thai economy is overall expected to steadily recover in all components, especially services sector. For the year of 2022, ttb analytics estimates total foreign tourist figure to be at 4.5 million persons, led by ASEAN and Europe. Meantime, Chinese tourists is expected to rebound in the fourth quarter of the year. Regarding domestic economy, private consumption would persistently get pressure from rising inflation, which is projected to stand at 6.7% in 2022. However, there are positive sign from labor market recovery as well as stimulus measure through domestic travelling campaign, namely the fourth phase of We Travel Together program which is extended till the end of October 2022. This will help sustain private consumption's recovery, even with softer momentum. Private investment also tends to gradual improve in accordance with the rebound of manufacturing production and trade. However, investments in real estate and construction will get hit from rising costs of construction materials in line with the prices of steel and energy. About merchandise export, its recovery phase is projected to decelerate due to global economic slowdown from rapidly rising inflation. In spite of this, there are supportive factors from strong global demands for exported foods and greater export prices, particularly the prices of petroleum-related products. This makes total export value of 2022 to grow 7%, decelerating from 17.1% last year. According to the improvement in all growth drivers at a gradual pace, ttb analytics projects that Thai economy in 2022 will expand 2.8%, continuously recovering from last year of 1.6%. About financial market prospect, Thai policy rate is likely to increase in the second half of the year to control inflation. ttb analytics thus expects Thai policy rate to reach 1.00-1.25% at the end of the year. Thai baht is forecasted to depreciate in the third quarter due to the US dollar's appreciation before it will appreciate again in the future due to Thailand's tourism recovery and MPC rate hikes. Thai baht is accordingly estimated to move within the range of 35.0-36.0 baht per US dollar.

Research by

ttbanalytics@ttbbank.com

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Summary of TMBThanachart's operating performance

As a country reopened and business activities gradually resumed amid continuing challenges from the COVID-19 variance and cost- push inflation, TMBThanachart (TTB) has developed business operational efficiency through new digital investment and group restructuring initiatives to enhance performance and capture new opportunity for growth. TTB 2Q22 financial performance continued the positive momentum, reinforced by recovering revenues, manageable asset quality under the Bank's prudent risk management and the cost discipline. Therefore, 2Q22 net profit increased by 8% QoQ and 36% YoY. The topline growth regained its growth momentum from improvement in net fee incomes and stabilized trend of NII while OPEX rose from business expansion. Asset quality was under control, led by a decrease in ECL. In addition, TTB's balance sheet optimization initiatives remained key post-merger strategy to create optimal financial structure for sustainable returns. Loan portfolio selectively grew on track and the growth of high-yield retail products started to show positive sign, thanks to ttb consumers, the new sales force engine supporting loan growth.

Building long-term funding base ahead of interest rate hike together with optimizing deposit structure: The continuous effort of balance sheet optimization by balancing low-costdeposit, like CASA & hybrid products, and high-costTime Deposit resulted in well-manageddeposit mix. As of June 2022, total deposit increased by 4.2% YTD to THB1,395 billion mainly from retail-TDproduct acquisition namely Up and Up as a part of funding management to build long-termfunding before rising of interest rate. In terms of our retail flagship products, All Free continued its growth pace by 4.3% YTD and No-fixeddeposit also grew by 2.1% YTD. In regard to TTB's deposit direction, retail-TDUp and Up would be another key strategic product for retaining existing wealth customers by offering competitive interest rate with high flexibility and, together with well-balancedwith our flagship products deposit, ensuring efficiently-manageddeposit cost going forward.

Prudently growing loan in selected areas and resuming growth in retail high-yield products: TTB has been selectively growing loans and focusing on quality growth strategy during the pandemic. As of June 2022, total loan to customers increased by 1.6% YTD to THB1,393 billion from commercial and retail segments. Corporate lending on consolidated basis decreased by 1.2% YTD, due mainly to the repayment of large corporate loans while SME loans* increased from re-segmentation.However, retail loans especially in targeted segment like hire purchase and mortgage loans continued to expand by 1.7% and 1.7% YTD respectively as the Bank saw a recovery sign of new booking in both areas. ttb consumer, new key driving sales force to build stronger unsecured loans and credit card portfolio, started to yield a result as unsecured loan and credit card grew 0.8% and 0.7% YTD respectively.

Recovering sign in revenue side with stabilizing trend of NII and better net fees income: TTB's NII showed stabilizing trend following the loan growth momentum against unstable economic recovery. 2Q22 net interest incomed reported at THB12,414 million, relatively stable QoQ due primarily to moderate loan growth aligned with the Bank's selective loan growth strategy. Moreover, ttb consumer would be another sales engine to enhance high-yieldretail loan port and improve asset yield further. NIM dropped by 8 bps QoQ to 2.83% from lower yield on earning asset as the Bank temporarily parked excess liquidity in low yielding asset before prudently redeploy to better asset yielding and higher funding cost, in line with our deposit strategy in preparation of interest rate hike. Non-NIIrose by 3.3% QoQ to THB3,475 million due mainly to higher net fees and service income as bancassurance fees showed strong recovery from previous quarter while mutual fund remained softened from unfavorable market sentiment. Commercial fees were quite stable. Total operating income, therefore, increased by 0.7% QoQ to THB15,889 million in 2Q22.

Slightly softening PPOP from new investment costs to capture post-merger revenue synergies: Due to the post-mergerinitiatives to set up ttb consumer and launch new mobile application, operating expenses increased by 3.9% QoQ to THB7,262 million. However, TTB still has cost discipline to ensure all expenses were well-managed.Thus, cost-to-incomeratio excluded purchase price allocation (PPA) impact registered at 44%, marginally increased from 43% in 1Q22 due to HR expenses of ttb consumer as well as marketing and software expenses, following digital investment plan. As a result, Pre-provisionoperating profit (PPOP) slightly declined by 0.7% QoQ which recorded at THB8,752 million in 2Q22.

Asset quality was under control by prudent risk management scheme amid unfavorable economic headwinds: TTB has maintained a prudent risk management and closely monitored asset quality with stringent ECL model as well as considered potential forward-lookingrisks through Management Overlay. In 2Q22, the Bank set aside expected credit loss (ECL) and management overlay of THB4,382 million, decreased by 8.9% QoQ and equaled to a credit cost of 127 bps. This ECL level reflected the Bank's tightening risk management and customers' repayment capability of the current loan portfolio. Moreover, stage 3 loan totaled to THB41,331 million improved from 1Q22 owing to proactive NPL resolution. Thus, NPL ratio stood at 2.63% in 2Q22, dropped from 2.73% in 1Q22. However, the ECL would remain at the elevated level as per guidance, in line with the Bank's direction to be prudent amid uncertainty environments.

After provision and tax, TTB reported THB3,438 million of net profit in 2Q22 which increased by 7.6% QoQ and 35.7% YoY and represented the ROE of 6.5%.

Note: * SME: Small and medium SME customers with annual sales volume up to THB400 million including owner operators.

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Discussion of operating performance

Figure 1: Selected Statement of Comprehensive Income

Note: 1. Consolidated financial statement

2. In 2Q21 and 1H21, the Bank has reclassified fee service income, service expenses, other operating income and OPEX to reflect nature of business, therefore figures in 2021 period are reclassified for comparative purposes

Net interest income (NII) and Net interest margin (NIM)

For the 2nd quarter of 2022: TTB recorded THB12,414 million of net interest income (NII) in 2Q22, relatively stable compared to previous quarter ( QoQ) but decreased by

2.9% compared to the previous year (YoY). Details are as follows:

• Interest income increased by 1.3% QoQ but decreased by 1.1% YoY to THB15,885 million. The QoQ increase was a result of moderate loan growth as we prudently resumed growth in retail space while strategically grew low risk commercial loans to optimize excess liquidity.
• Interest expenses increased by 6.2% QoQ and 5.8% YoY to THB3,471 million due primarily to higher deposit balance and interest on interbank as a part of liquidity management.

In the first half of 2022, net interest income decreased 3.2% YoY to THB24,823 million.

Details are as follows:

• Interest income decreased by 2.6% YoY to THB31,562 million, primarily due to the lower yield on loan amidst unstable economic environment, offsetting an increase in interest on hire purchase.
• Interest expenses slightly declined by 0.3% YoY to THB6,739 million, mainly owing to lower interest on debt issued and borrowings, outweighed the higher interest on deposit from deposit growth.

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