Why Siam Commercial Bank's NPL situation is better than its peers'

Only SMEs saw NPLs rose to 7.2% in Q2.

Siam Commercial Bank remained cautious about extending loans, especially to SMEs, to control NPLs, according to Maybank Kim Eng.

The growths in toplines were sluggish in 1H17, including weak loan growth, lower NIM, and soft non-interest income, especially in the bancassurance business.

Here's more from Maybank Kim Eng:

For loans, we believe it was due to the bank’s attempt to control NPLs, as reflected by a 1.6% QoQ contraction in its SME loan book. Thus, the bank’s NPLs (plus write-offs) rose slower than peers in 1H17 (+THB9b vs THB12-29b for big banks).

The impact from the lending rate cut in May to the bank’s 2Q17 NIM remained at a minimum as NIM weakened only 5bps. The NPL situation appeared to be better than peers in 2Q17, as mentioned above.

Only SMEs still saw NPLs rise during the period (from 6.5% in 1Q17 to 7.2%), while that of other segments remained flat. We believe SCB’s NPLs will remain satisfactory in 2H17 as SCB has less exposure to SMEs than peers. Key risk to our call is loans to property developer PACE (PACE TB, Not-rated), which reportedly borrowed THB13b from SCB and now has liquidity problems, as suggested by the negative equity. We will closely monitor this risk.