SCB turns investment-banking focus on fee income from wealth creation

Corporate lending will play less of a role in driving SCB's revenue than fee income, senior executive vice president Arthid Nanthawithaya said yesterday.

Fees generate 70 per cent of overseas banks' income against just 30 per cent for Thai banks, he said, adding that Thailand has however reached a new chapter in terms of competitive forces with the changing global economy and the upcoming Asean Economic Community.

Corporate firms now require financial services beyond loans, he said, adding that such businesses want to see what banks can do for them in terms of adding value and enabling them to grow sustainably in the new economic environment.

Under the new model of SCB investment banking, the bank will provide a total solution comprising advisory and treasury services to support its business deals. These deals might not add to the bank's lending, but they must bring in fee income, he stressed.

Therefore, the priority task for investment banking is how to create fee income, not how to drive loan growth, as the latter cannot contribute income as healthy as that provided by the former, said Arthid.

To prepare for the rising focus on financial solutions, SCB plans to add to the 40 professionals it currently has in its investment-banking operation in order to provide superior services across key industry sectors and products.

He said that if the bank maintained its strict criteria for giving loans, it would not be able to avoid either a lower margin or a pricing war. However, the investment-banking focus will increasingly be on value creation, which will strengthen customers' business and make them more competitive.

The executive added that the new investment-banking platform meant the contribution of fee income would increase from 30 per cent to 45 per cent by the end of the year.

SCB currently has 24 business mandates, consisting of 13 mergers and acquisitions, five initial public offerings, three equity offerings, two property funds and one advisory deal. The combined transaction value is more than Bt100 billion.

Sopon Aswanuchit, executive vice president and head of SCB's corporate finance division, said this was sharply higher than the 10 deals it executed last year, reflecting the fact that corporates are transforming their businesses to deal with the changing global economic environment.

He said the proportion of fee income from SCB's investment banking was higher than for the investment-banking industry as a whole. The overall income of the industry is expected to be in the range of Bt1.6 billion to Bt1.7 billion this year, he added.

Sopon said the bank is providing financial solutions to medium-sized corporate as well as blue-chip firms, especially in the commercial sector, which is expected to be a rising star next year. About 70 per cent of deals in 2012 are expected to come from the commercial sector.

"The overall scale of corporates will be smaller, because they are transforming their businesses in line with the moves by larger companies. This transformation is an opportunity for SCB to provide its financial solutions," he said.