Siam Commercial Bank's profits down 24% to $262.82m in Q2

The lender has set aside $305.4m of provisions given ongoing uncertainties.

Siam Commercial Bank (SCB) and its subsidiaries saw its profits fall 24% YoY to $262.82m (THB8.4b) for Q2 2020 on the back of higher provisioning, the bank announced.

For the first half of 2020, net profit fell 13% YoY to $554.16m (THB17.6b) whilst pre-provision operating profit grew 15% YoY.

“The impact of the pandemic on the bank’s top-line performance and earnings outlook has started to be felt this quarter,” said Arthid Nanthawithaya, chairman of the executive committee and CEO, SCB. “Nevertheless, we are confident that the bank's strong capital position and high loan loss provisions will enable us to weather this recession.”

Net interest income decreased 7% YoY to $749.37m (THB23.8b) in Q2 mainly due to compressed net interest margin following multiple cuts in the policy interest rate to a historic low. Further, there was also a drop in NII contribution following the lender’s divsement of SCB Life.

Total loans declined by 1% YoY in Q2 but rose 2% compared to the first quarter due to higher loan demand from corporate customers and extension of soft loans to business customers, said SCB.

Non-interest income increased 19% YoY to more than $393.45m (THB12.5b) largely from improved income from wealth and bancassurance businesses as well as one-time gains on sale of investments and corporate deals.

“Given an abrupt halt in economic activity during the COVID-19 lockdown in the second quarter, business volume was down significantly from April but showed early signs of recovery in June as lockdown restrictions were gradually eased,” SCB stated in a press release.

The lender has set aside $305.4m (THB9.7b) of provisions in Q2, given the uncertainty generated by COVID-19 and the lender’s on-going relief programs to assist impacted customers, according to SCB.

On the upside, operating expenses dropped 3% YoY to around $506.77m (THB16.1b) due to lower overall spending during the nationwide lockdown and the lender’s other cost control measures.

Non-performing loans declined to 3.05% at the end of June 2020 given the Bank of Thailand’s current guideline on deferral of NPL classification for loans under relief programs. NPL coverage ratio increased to 152% and the Bank’s capital adequacy ratio remains strong at 18%.

SCB’s cost-to-income ratio for the second quarter was stable at 44.5%.