Siam Commercial Bank face dampened 2020 growth prospects: analyst

NPL ratio will likely rise to 3.7% this year.

Siam Commercial Bank will likely have a weak earnings growth on top of a lukewarm loan demand, shrinking net interest margin (NIM) and lower non-interest income, according to a UOB Kay Hian report.

Whilst non-performing loan (NPL) ratio is seen to hike to 3.7% this year, net profit is likely to recover 3.4% YoY in 2021 after a 16.3% slip in 2020, said analyst Tanadech Rungsrithananon.

Net loans dipped 2.9% YoY in January against 0.3% in December, brought about by the COVID-19 outbreak hitting tourism and exports. Loan growth is expected to soften in H1 and rebound in H2 2020 due to stimulus measures and high seasonal spending in Q4. Full-year growth is forecasted to rise 1% YoY this year over slow consumption and private investment.

Gross NPL surged 21.1% YoY in 2019 across all segments, with SCB seeing the biggest increase amongst large banks, the report noted. NPL ratio is likely to continue the upward trend to 3.7% this year, higher than management guidance of 3.4%.

To reflect asset deterioration, credit costs will remain high at 130bp in 2020 with coverage ratio likely at 132%, the report said.

The monetary policy committee is expected to cut its policy rate by 25bp in the March or May meetings to 0.75%. Because of this, UOB Kay Hian expects SCB’s NIM to dip to 3-3.1% in 2020-21, lower than the guidance of 3.2-3.4%