Monday, February 17, 2020

Gains from SCB Life sale pump up SCB profits

Jan 18. 2020
Arthid Nanthawithaya
Arthid Nanthawithaya
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By THE NATION

Siam Commercial Bank and its subsidiaries reported pre-provision operating profit (PPOP) of Bt95.6 billion last year, up 30 per cent year on year (YoY).

This strong PPOP growth over 2018 was primarily driven by the recognition of extraordinary gains from the sale of SCB Life. Nevertheless, the bank also set aside higher provisions in 2019, resulting in the annual net profit (based on unaudited consolidated financial statements) of Bt40.4 billion. The bank also announced a special dividend of Bt0.75 per share to be paid out in mid-February.

Net interest income grew at 3 per cent (YoY) to Bt99.4 billion. Despite falling interest rates in 2019 and a slight decline in the overall portfolio size, the bank was able to sustain this growth momentum by rebalancing its loan portfolio towards higher margin products.

Non-interest income surged 59 per cent (YoY) to Bt66.7 billion mainly due to large investment gains from sale of SCB Life recorded in late September. Excluding this one-off item, non-interest income would have returned to its growth trajectory of 2 per cent (YoY) with improved recurring income and a new income stream from the bancassurance partnership that commenced in the fourth quarter.

Operating expenses grew at 9 per cent (YoY) to Bt70.5 billion mainly because of one-time personnel expenses to comply with the new labour law and transformation-related expenses. With the strong top-line growth of 20 per cent (YoY), cost-to-income ratio declined to 42.5 per cent.

The Non-performing loan (NPL) ratio rose to 3.41 per cent at the end of December 2019 from below 3 per cent in the first half of 2019. This deterioration reflected a challenging business environment as economic headwinds intensified in the second half of 2019 coupled with the bank's prudent loan classification policy.

Given the current trend on asset quality as well as economic uncertainty, the bank has set aside total loan loss provisions of Bt36.2 billion for 2019. At the end of December 2019, NPL coverage was maintained at 134 per cent.

The bank’s capital adequacy ratio remained strong at 18.1 per cent. Therefore, following the sale of SCB Life shares, the board has approved a special dividend payment of Bt0.75 per share. The final dividend for 2019 will be reviewed and approved at the annual general meeting in April.

Arthid Nanthawithaya, chairman of the executive committee and CEO, said: “Given the current economic uncertainties the bank has proceeded with caution, especially in the area of loan growth, by focusing on high quality segments. With the expectation of moderate loan growth for the banking sector, the bank will continue to rebalance its loan portfolio towards higher-margin businesses with an emphasis on digital lending and wealth management, as well as improving efficiency and expense management. In addition, the bank is leveraging new capabilities from the transformation effort and working closely with various partners and leading fintech companies to build new business models that will enhance the bank's long-term competitiveness."

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