SCB expects loan growth to come back in line with market
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After seeing its business grow faster than the market for the past three years, Siam Commercial Bank is considering slowing down in line with the market as the economy is no longer on an uptrend.
SCB is the third largest bank by assets but was the biggest by profit for all three years since it revamped its lending by focusing on retail and SME customers to drive loan growth in the double digits and boost its net interest margin.
From 2010-12, SCB recorded net profits of Bt24.20 billion, Bt36.27 billion and Bt40.22 billion. For the first nine months of this year, net profit reached Bt38.48 billion.
President Kannikar Chalitaporn said the bank had to cash in on the opportunities presented when the economy was on a roll. Retail banking and SME lending were chances to earn profits and expand the loan portfolio.
The bank had set a loan growth target of 20 per cent in the past three years, while market growth was 15 per cent.
To beat the market, the bank needed to expand retail banking and build market share in the SME segment to reach the top three.
The economy is not booming as it once was. SCB knows that its growth can no longer be much higher than the market, so its loans, starting next year, should return to the normal growth path.
If a category was not climbing up and might hurt the bank, the bank was ready to slow lending to reduce the danger.
For example, SCB used to be extremely active in the used car market due to the high margin, but when the market showed signs of suffering from the first car scheme, SCB decided to slow lending in the first half of this year.
Based on the forecast of gross domestic product growth at 4.5 per cent in 2014, SCB set its loan growth target at around 10 per cent.
GDP expansion of 4-4.5 per cent is not enough to strengthen the banking or other industries because Thailand has stayed at 4 per cent for a decade. In fact, the Thai economy should be doing at least 5 per cent if the country can boost its competitiveness.
Data edge
”Knowledge resources and data” is the competitive advantage of SCB, which has its own research house – the Economic Intelligence Centre – to provide an economic outlook as a guideline to set a strategic direction.
The bank has also developed a data centre as a tool for helping to analyse what kinds of segments generate profits. The data centre helped the bank adjust quickly by pointing out what it should focus more on and what it should avoid because of high risk.
The business direction next year for SCB is to emphasise loan quality and tap categories that show low non-performing loans (NPLs) but still make reasonable profits.
SCB noticed NPLs rising among self-employed individuals who do not have a track record at the National Credit Bureau. SCB will not focus on this kind of customer, including individuals with a monthly income lower than Bt10,000 because high household debt was found in this segment.
The export sector is one that SCB should beware of because it was directly hit by the global economic uncertainties. However, SCB has few customers in the export sector. The bank should tap this sector because exports for the long term remain the bright sector for the Thai economy, she added.
