Siam Commercial Bank's 2Q profit seen to surge

Thanks to the bank's key strategy.

Siam Commercial Bank is expected to post a net profit of THB14b for the second quarter of the year, up 10% YoY and 6% QoQ, because of the key strategy the bank has been employing to offset weak loan and fee income growth in the same time period.

According to a research note from Maybank Kim Eng, Siam Commercial Bank's expected increased profit is thanks to the bank’s key strategy of: deposit cost reduction; OPEX cost controls; and accelerating fee and net insurance income.

The report noted that Siam Commercial Bank's loan growth was -0.6% YTD to May14. The report also said that Maybank Kim Eng maintains its 6% loan projection and that it expects loan demand to recover in 2H14 driven by corporate and consumer (mortgage and credit card segments) loans.

Here's more from Maybank Kim Eng:

We expect SCB to book THB2.1b pre-tax gains from the sale of its non-life insurance subsidiary. For core operations, retail fee income should offset the weak loan related fee and net trading income.

NIM is expected to improve by 9bps QoQ to 3.29% in 2Q14 as deposit costs are falling. Note that the bank targets 3.1-3.3% NIM in 2014. We expect cost to income to stay at a low level due to the effective OPEX cost control.

We expect SCB to use the extra gains from the sale of its non-life insurance subsidiary to set aside extra provisions of THB1.5b in 2Q14. Hence, we assume 0.96% credit costs in 2Q14. Gross non-performing loan (NPLs) should increase slightly parallel to the market and economic conditions.