Bangkok--20 Jul--Siam Commercial Bank
Siam Commercial Bank, Thailand’s largest Bank by market capitalization, announced record second quarter net profit of Baht 10,074 million, a 23.9% year-on-year increase from Baht 8,132 million recorded in 2Q11. The year-on-year increase in net profit was driven by significantly higher net interest income on the back of robust loan growth, strong insurance premium income and higher net fee and service income. Also, while asset quality continued to improve, with NPLs at a new post-1997 low, the Bank prudently set aside significant additional provisions.
Commenting on the strong results, Dr. Vichit Suraphongchai, Chairman of the Bank’s Executive Committee, noted that “the results reaffirm the strength of SCB’s universal banking franchise as well as the faster than expected recovery of the Thai economy following the havoc caused by the floods late last year. Also, despite the many macro-economic uncertainties created by the troubled global economic climate, the Thai credit up-cycle remains relatively unscathed at this time. In particular, the credit demand from retail customers remains robust and the Bank has been able to capitalize in a prudent manner on the opportunities in the market place, without compromising its high risk management standards”. He added that “the results reflect the competitive edge that our multi-year transformative change program provided to the Bank”.
The 23.9% increase in the record second quarter net profit was anchored on substantial increases in both net interest income and non-interest income:
- Net interest income increased by 20.9% year-on-year to Baht 15 billion in 2Q12, an all-time high for the Bank, mainly as the result of robust loan growth of 20.2% year-on-year, improving loan yield, and the more substantial investment portfolio. The higher than banking sector loan growth arises from three segments that the bank has gained market share over the quarter — the smaller end of the SME market, residential mortgages and automobile lending; while also benefitting from the higher than expected customer demand for products in these segments. Finally, the net interest margin at 3.22% was better than expected and much higher than the preceding quarter.
- Non-interest income rose 19.4% year-on-year, principally the result of solid growth in net insurance premium income (42.2% year on year), higher net trading income and continued growth in net fee and service income. The Bank’s life insurance subsidiary, in which the Bank has a 94.7% equity stake, continues to outperform in the life assurance market in Thailand on the strength of the Bank’s dominant retail distribution footprint.
Despite the many ominous global economic indicators and the continued overhang from the floods last year, the Bank’s asset quality continued to improve and the percentage of NPLs at the end of the current quarter stood at a post-1997 low of 2.25% - well below the 2.69%% level at the end of the second quarter in 2011 and the 2.39% level at the end of the preceding quarter. However, given the difficulties in assessing the near term economic outlook, the Bank prudently set aside additional provisions of Baht 1 billion, at the Bank level, as a cushion for furture uncertainties. As a result, the coverage ratio over NPLs improved to 140.2% from 114.5% at the end of the second quarter of 2011, and 127.1% at the end of 2011.
Khun Kannikar Chalitaporn, the President to the Bank, stated that “the record results demonstrate the soundness of our business strategies, the effectiveness of our business model and superior execution capability. Underscoring these strengths is the overarching drive across the SCB group to engender deeper customer intimacy and strong employee engagement that provides sustainability to these record results and further enhances shareholder value”.a