The New Labor Law Pressures SCB’s 1Q19 Profit to Record at ฿9.2bln., Down 19%!
SCB has reported a THB 9.2 billion of profit in the first quarter of 2019, plunged 19% mainly from severance pay necessitated by the amended labor law.
The Siam Commercial Bank Public Company Limited (SCB) has reported its 1Q19 consolidated financial statement through the Stock Exchange of Thailand as follows:
In the first quarter of 2019, SCB recorded a net profit of THB 9.2 billion, down 19% YoY mainly from a one-time increase in personnel-related expenses (severance pay) necessitated by the amended labor law, the QoQ change showed a 29% increase driven by improvements in some key areas.
On the back of 3% yoy loan growth, net interest income (NII) grew 6% yoy but decreased slightly by 0.3% qoq to THB 24.7 billion as a result of the Bank’s efforts to rebalance its loan portfolio and expand high margin lending business.
Non-NII improved 10% qoq mainly driven by an increase in trading & FX income. Moreover, resumption of positive net insurance premium also contributed to strong non-NII for this quarter.
Operating expenses rose 10% yoy and 11% qoq to THB 17.8 billion due to a one-time increase in personnel-related expenses of THB 1.4 billion to comply with the amended labor law. Excluding the one-time expenses, the cost-to-income ratio would be 47.5% which is lower than 47.7% in the previous quarter. Overall, the Bank’s expense growth, excluding the one-time expense, was well contained at merely 1% yoy and 2% qoq.
In the first quarter of 2019, asset quality continued to strengthen with a decline in non-performing loans (NPLs) and a further improvement in NPL ratio to 2.77% from 2.85% in the previous quarter. In light of the additional provisions provided in the last quarter, the Bank set aside THB 5.4 billion of provisions or 102 bps in credit cost to ensure an adequate level of buffer against the current growth momentum. NPL coverage ratio also strengthened to 152.8% compared with 146.7% in the previous quarter and the Bank’s capital adequacy ratio remained strong at 17.1%.
Mr. Arthid Nanthawithaya, Chairman of Executive Committee & CEO, stated that Despite the impact from one-time staff costs to comply with the amended labor law, the Bank’s core business engines remain resilient with great potential to strengthen further as benefits from the Transformation Program continue to be realized and more customers migrate to digital platforms.
SCB is currently in the phase of monetizing the Transformation Program and reaping productivity gains from digitization which will drive revenue enhancement from new businesses and further reduce operational expenses over time. The Bank also adopts an agile culture on the four pillars of customer centricity, speed, innovation, and risk culture to advance toward the goal of being the Most Admired Bank.