Siam Commercial Bank advised to overhaul mobile app: analysts

Its app logged 26 failure occurrences in 2023, UOB Kay Hian analysts said.

Siam Commercial Bank’s (SCB) should set aside expenses to overhaul its mobile banking application, analysts said in a report.

Statistics showed that SCB’s mobile banking app logged the most “failures” in 2023, with 26 occurrences, noted UOB Kay Hian analyst Tanaporn Visaruthaphong and assistant analyst Thanawat Thangchadakorn in their latest commentary report on SCB X. 

Notably, the mobile app experiences issues during the end and beginning of every month, especially for the monthly payroll date, the analysts noted.

“In our view, SCB needs to set aside expenses for overhauling the mobile banking application. As a result, we reckon the operational costs will increase,” Visaruthaphong and Thangchadakorn said.

Another scenario they suggested is for the bank to renew the whole banking system, which may result in higher expenses and a higher cost-to-income ratio.

Asset quality pressures risingd
Already, SCB exceeded its target credit costs for 2023 at 182 basis points (bp). This is much higher than the 120 to 140 bp range it was targeting.

Challenges in 2024 are expected to put more pressure in the bank’s asset quality, although the bank has been making moves to decline its credit costs on a quarterly basis.

For Q4, SCB reported that its credit cost declined to 151bp, which is 47bp lower than the 199bo it reported for Q3 2023.

Loan loss coverage ratio declined to 160%, whilst its non-performing loans (NPL) ratio rose to 3.44% (vs 3.30% in 3Q23). 

Visaruthaphong and Thangchadakorn said that they will “cautiously monitor” SCB's asset quality in H1.

“The main concerns will come from: a) an expected deterioration in the SME segment in the system maypressure SCB (17% exposure in Q4 2023), and b) the fragile retail segment worsening due to the uneven economic recovery persisting and no additional government stimulus,” the analysts said.

Credit card issues resolved
On a more positive note, SCB said that its credit card business’ issues have been resolved. 

SCB’s management noted that the problem occurring in the credit card business (CardX: Gen2 Business) whilst migrating clients to the new system has been resolved and stabilised. 

With this, the analysts expect SCB’s confidence in credit cost in the credit card business to improve in 2024.

“In our view, we believe that the credit cost in the credit card business should be better than in 2023,”  Visaruthaphong and Thangchadakorn said.

However, they note that SCB will still face some challenges in the credit card business as the client segment is retail. 

“Therefore, we expect the credit cost in the credit card business will remain high and SCB will need to monitor closely and be prudent in 2024,” they said.