Bangkok--19 Jan--Siam Commercial Bank
From a global standpoint, 2008 ranks as the one of the worst years in the history of financial institutions. Yet, amidst this unprecedented financial turmoil, SCB was able to maintain a strong financial position (BIS capital adequacy ratio of 16.3 % at the yearend) and announce a record annual net profit in 2008 of Baht 21.4 Billion - an increase of 23.4% from 2007. The results reflect the strong focus on risk/return improvement through the adoption of more stringent underwriting criteria, and have culminated in modest yet profitable income growth (up 12.9%) balanced by a substantive improvement in the underlying asset quality (NPL ratio of 5.1% at the end of 2008). Finally, the areas of business emphasis in 2008 — growth in the business volume with major domestic enterprises and expansion of “wallet share” from cross-selling to the large existing retail customer base — proved to be inherently sound and sustainable strategies in 2008.
Commenting on the strong positioning and performance of the Bank at this critical juncture, Dr. Vichit Suraphongchai, Chairman of the Bank’s Executive Committee, noted that “the multi-year drive to successfully transform the Bank has just passed through its first major test in flying colors. In particular, core profitability has been sustained despite the dramatic economic slowdown in Thailand and the world, and the underlying asset quality has substantively improved despite the adverse economic headwinds. Too, these results confirm the soundness of the Bank’s universal banking business model that has diversified risk and multiplied sources of profitable growth. More importantly, the results attest to the appropriateness of the business strategies at a time of unrelenting economic change. In the year ahead, we anticipate further challenges and our business thrust will be anchored on a prudent and cautious stance”.
2008 Net Profit stood at Baht 21.4 Billion — a 23.4% increase from 2007. This was achieved through steady growth in both the Bank’s Net Interest Income or NII (up 13.2% from 2007) and Non-NII such as fees and services income (up 12.4% over 2007). This was achieved despite the impairment to, and losses from, investments as a result of the steady erosion of value within the financial markets — globally and domestically — in the third and fourth quarter. Profitability was also enhanced by the ongoing efforts to contain expenses resulting in significant improvement in the cost-to-income ratio (49.4% in 2008 vs. 53.0% in 2007), despite the on-going increase to the cost of equipment and personnel arising from network and business expansion.
Concurrently with the improvement in Net Profit, the Bank took action to conserve capital and steadily improve its capital adequacy ratio or CAR. CAR stood at a record high of 16.30% at the end of 2008 compared to 13.1% at the end of 2007. Significantly, Tier I capital at 11.86% stood well above the statutory minimum of 4.25%. This strong capital ratio positions the Bank to withstand any shocks that may arise from a sustained economic downturn in the year ahead.
The Bank attributes this strong capital and profitability positioning to its focus on effective management of the risk-reward curve. As a consequence, the Net Interest Margin (NIM) improved by about 13 basis points over last year (3.93% at end 2008), while at the same time the level of NPLs dropped to 5.1% of loans (compared to 6.1% last year). In the anticipation of the economic uncertainties throughout 2008 and the adoption of more stringent underwriting criteria and heightened awareness of the credit risks, loan growth was tempered in line with the economic slowdown (5.6% growth in 2008). In parallel, a high NPL coverage ratio was maintained throughout 2008 (at 83.3% at the end of 2008) and, as a prudent measure, the level of monthly provisions was increased from Baht 300 million per month to Baht 500 million per month in the last quarter, and is likely to remain at this higher level for 2009 in anticipation of the weakening economic environment.
The two core business thrusts for much of 2008 were a strong push in expanding the business relationships with the major domestic enterprises and the increased efforts to cross-sell products to the large pool of retail customers. Both these strategies have culminated in a strong pay-off in 2008 itself and will provide a formidable platform for future growth.
Khun Kannikar Chalitaporn, the Bank President, noted that “the solid financial position of the Bank and 2008 results attest to the soundness and sustainability of the Bank’s growth platforms. Our desire is to not just withstand the shocks that may arise during this adverse economic cycle, but also to capitalize from the inevitable opportunities that we will find in this turmoil over the coming months. Our aim is to provide our shareholders with a compelling value proposition that will justify the market premium that our share attracts today, consistent with our mission to be the “Bank of Choice” for our Customers, Shareholders, Employees, and Community”.
For more information please contact:
Corporate Communications Division
Tel: 02-544-4502, 02-544-4517
Email: [email protected]