Siam Commercial Bank could reduce credit costs in 2H16 on back of improving NPLs

The bank's NPLs fell by 22bps in 1Q16.

Without management’s guidance, Maybank Kim Eng estimates 2Q16 net profit may have increased 17% QoQ as there should not be extra expenses in 2Q16. SCB’s credit cost may have remained at 1Q16’s level but the pace of growth in NPLs should have decelerated thanks to improving macro conditions.

Improving NPLs may allow SCB to lower credit cost in 2H16, making earnings improve QoQ throughout the rest of 2016.

"SCB’s NPLs fell by 22bps in 1Q16 because it reclassified a large corporate client’s loan back to normal loan conditions. We believe this is one-off and NPLs in 2Q16 should have risen again in line with other big banks. But the pace of new NPLs should have decelerated. We believe the bank may have maintained the credit cost at about the same level as in 1Q16. As a result, we expect a sizable 17% QoQ increase in the bottom line to THB12.3b in 2Q16," Maybank Kim Eng added.

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