SCB Posts 40% Growth of Profit in 3Q to Book Near ฿15bn from SCB Life-Higher Net Fee!

The Siam Commercial Bank Public Company Limited (SCB) has announced its 3Q19 consolidated financial statement through the Stock Exchange of Thailand as follows:

SCB announced a third-quarter net profit of 14.8 billion baht which was 40.8% higher than the same period last year. This was a result of net profit of 10.5 billion baht from normal operations and a one-time capital gain from the sale of SCB Life of 11.6 billion baht to FWD Group Financial Services Pte. Ltd.

In this quarter, SCB has set aside additional provisions of 9.1 billion baht on top of its normalized quarterly requirement of 6.2 billion baht. For the first nine months of 2019, net profit stood at 34.9 billion baht, up 5.9% YoY.

 

Despite moderate loan growth of 2.2% YoY due to the slower economy, net interest income (NII) increased 7.4% YoY to 26.2 billion baht in the third quarter. SCB’s proactive risk management and strategy to rebalance its loan portfolio towards higher margin products was the main reason for this NII growth.

Non-interest income increased significantly by 231.6% YoY to 34,260 million baht in 3Q19 mainly due to a one-time gain from sale of SCB Life and higher net fee income, particularly from mutual fund business, loan-related fees and card business. The above increase was partly offset by lower net gain on trading and foreign exchange transactions and negative net insurance premiums.

SCB’s total operating income, including the one-time gain, rose significantly by 74.1% to 60.5 billion baht which far exceeded expense growth. Consequently, SCB’s cost-to income ratio declined to 29.1% in the third quarter.

Operating expenses increased by 6.4% yoy to 17,563 million baht in 3Q19 primarily due to higher staff cost from annual salary adjustment, higher other expenses as well as higher premises and equipment expenses which reflected higher depreciation from SCB’s transformation program.

Non-performing loan (NPL) ratio rose to 3.01% at the end of September 2019 from 2.77% at the end of June 2019, reflecting the current state of the economy and prevailing economic headwinds. NPL coverage ratio stood at 144% in the current quarter while SCB’s capital adequacy ratio remained strong at a record high of 18.0%.

 

“In this quarter, the Bank recorded a gain from the sale of SCB Life. In light of domestic economic uncertainty and global economic volatility, we foresee the need to strengthen ourselves. Thus, the Bank set aside additional provisions against potential problem loans. At the same time, we also continue to pursue long-term growth opportunities particularly from wealth management and life insurance businesses where we will start the partnership with FWD Group in the fourth quarter of this year. We will also explore new investment opportunities for long-term future growth of the Bank,” stated Mr. Arthid Nanthawithaya, Chairman of the Executive Committee and CEO.

 

SCB Life
On September 26, 2019 SCB successfully completed the shares sale of SCB Life Assurance Public Company Limited (SCB Life) and entered into a long-term Distribution Agreement with FWD. Hence, the operating performance of SCB Life up until the completion date was incorporated into SCB’s results.

Also, upon completion of the shares sale, SCB received a total consideration of Baht 92.7 billion which resulted in a pre-tax capital gain of Baht 24 billion. As a result of this divestment, Common Equity Tier 1 ratio has been uplifted by 1.2% due to the capital released. Moreover, out of the total consideration of Baht 92.7 billion, Baht 17.7 billion will be recognized as income over 15 years according to SCB’s accounting policies. SCB will also receive payments common in bancassurance transactions over the course of the Distribution Agreement.