SCB, subsidiaries see Bt9.3-billion net profit

Higher net profit was driven by “top-line growth” of 9 per cent yoy and lower operating expenses compared to the same period last year, despite higher provisions against the current economic uncertainty, the bank said.
Net interest income increased 4 per cent yoy to Bt25.8 billion, reflecting the bank’s strategy to rebalance its loan portfolio towards higher-margin business, improved funding cost, and higher income recognition mainly from residential mortgages after the implementation of a new accounting standard at the beginning of this year.
Nevertheless, net interest income has been under pressure from a lower interest rate environment, contraction in total loan growth and a drop of net interest income contribution after divestment of SCB Life.
Non-interest income increased 20 per cent yoy to Bt11.9 billion, largely from higher recurring fee-based income.
In the first quarter, wealth management fees grew 31 per cent yoy to Bt2 billon and income from bancassurance businesses increased fivefold from the same period last year to Bt3.2 billion, mainly driven by the new partnership with FWD Group. These factors combined outweighed the impact of revised regulatory guidelines on the fee structure introduced at the beginning of the year and reduced transaction banking activity amid the Covid-19 crisis.
Operating expenses decreased 8 per cent yoy to Bt16.4 billion due to the absence of one-time personnel expenses recorded in the same period last year and SCB Life’s expenses after the divestment. As a result, the cost-to-income ratio for the first quarter improved to 43.6 per cent.
In light of the current unfavourable economic conditions, the bank has set aside Bt9.7 billion in the first quarter not only to cover new NPL formation but also to comply with the new accounting standard on asset impairment during the economic downturn. Non-performing loans stood at 3.17 per cent at the end of March 2020, with adequate NPL coverage at 140 per cent.
SCB’s capital position remains strong, with common equity tier 1 (CET1) of 16.1 per cent and a total capital adequacy ratio of 17.2 per cent. However, given the current economic crisis characterised by extreme volatility and uncertainty in both financial markets and the real economy with no end in sight, the bank’s board of directors decided to cancel the share repurchase programme of Bt16 billion approved on March 11 in order to best help the bank’s customers get through this unprecedented crisis.
The bank has launched relief programmes to help customers as well as participate in public assistance measures announced by the Bank of Thailand. Furthermore, this decision gives SCB flexibility and readiness to seize potential business opportunities that may arise from the crisis, it said.
“Although the bank had strong first-quarter performance as a result of enhanced capabilities from the transformation effort, the Covid-19 pandemic is taking a toll on people and the private sector,” said chairman of the Executive Committee and CEO Arthid Nanthawithaya. “It also poses significant challenges to the banking sector, both in terms of revenue and asset quality, which will become apparent in subsequent quarters.
“Despite the current impact on the real economy, the bank’s balance sheet remains strong as evidenced by the high capital adequacy ratio at 17.2 per cent and CET1 ratio at 16.1 per cent. These capital buffers and prudent risk management will help the bank weather the Covid-19 storm and potential economic recession in 2020,” he said.
“Our main focus right now is to support our customers to recover and restore their business by offering targeted relief packages and participating in public assistance measures announced by regulators. As the Covid-19 crisis rapidly evolves and unfolds, the bank will monitor the situation closely and will do our utmost to help our customers and the broader community in order to get through this challenging time together. Therefore, the bank deems it necessary to cancel the share repurchase programme to allow us to help our customers to the best of our ability,” he added.