Siam Commercial Bank profits down 5% to $354.87m in Q1

Higher operating expenses due to staff costs and digital efforts hit the bank’s earnings.

Siam Commercial Bank’s profits dropped 5% YoY to $354.87m (Bt11.4b) in Q1, according to UOB Kay Hian, as higher expenditures slowed down the bank’s profitability. 

Opex surged 21% YoY in Q1 with cost-to-income ratio at clocking in at 46% amidst higher staff costs (9%) and other expenses (59%) related to the bank’s digital transition. 

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Bad loan levels, however, remained stable as non performing loan ratio clocked in at 2.8% whilst coverage ratio strengthened from 137% 142% in Q1.

Here’s more from UOB Kay Hian: 

Net interest income (NII) expanded moderately by 3% yoy on higher loan volume (+6% yoy, +1.5% qoq) from the corporate segment (+8% yoy) and automobile hire purchase (+9% yoy). NIM, however, was under pressure, down 8bp qoq as loan growth was skewed toward corporate loans. We maintain loan growth forecast at 6% for 2018 as the bank will have more corporate loan drawdown throughout this year.

Non-interest income (non-II) grew 12% yoy, driven by higher fee (+12%) and forex (+54% yoy) income. The major source of fee income growth was from corporate finance and bancassurance fees. The bank has waived on-line transaction fees from 2Q18 and estimated the potential impact at Bt1b in 2018. Factoring this into our earnings forecasts, we cut our net fee income growth forecast for this year from 6% to 2%.