Siam Commercial Bank
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Focusing on SME in 2015
Siam Commercial Bank
- 4Q14 profit to drop due to higher OPEX
SCB's 4Q14 net profit is estimated at B12.2bn, falling 7.6%qoq but rising
4.2%yoy. Operating expense is projected to increase significantly mainly
due to seasonal effect, similar to peers. For core businesses, NIM, fee
income, and debt provision are expected to stay unchanged qoq, while net
interest income would grow. Overall, FY2014 earnings are projected at
B53.5bn, growing 6.5%yoy, 1% lower than our current forecast.
- To focus on SME in 2015, expanding client base and upgrading service
We maintain SCB's FY2014-2015 earnings forecast; its profit is estimated to
grow by 7.6%yoy in 2014 and 11.9%yoy in 2015. FY2015 GDP growth is
expected at 3.0-3.5%. SCB plans to take an advantage from its nationwide
coverage and focus more on SME clients in 2015, mainly value chain of
major clients, as well as supervise some minor SME clients in fragile
industries. The bank also aims to expand its client base by granting new
financial services like wealth advisory (for middle-upper class clients) and
digital banking service (for lower-class clients) in order to boost fee income
in the long run. In addition, SCB is upgrading its services on digital platform
in order to provide digital banking service, which would be popular in the
future.
- Laggard among big-cap banks
We recommend BUY. SCB has been laggard among big-cap banks. FY2015
fair value (GGM, 2.69x PBV, 21% long-term ROE) is B251.10, with over
44% total return.
