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Siam Commercial Bank PCL (SET:SCB), Thailand's third largest lender by assets, 2.77 trillion baht in 2015, operates four business segments: the wholesale banking group, the business banking group, the retail banking group, and the special business group, which is responsible for non-performing loan (NPL) solutions. As of December 30, 2015, SCB’s top two principle shareholders are the Crown Property Bureau, which manages the Thai royal family’s properties and investments, and Thailand-based Vayupak Mutual Funds One, with 23.69% and 23.21% of total shares, respectively. Foreign investors hold 35.69% of both ordinary and preferred shares.
SCB said on July 20 that its second-quarter 2016 revenues were 36.9 billion baht, beating the 32.33 billion baht consensus estimate of 4 analysts, according to the Financial Times. The company posted second-quarter 2016 earnings of 3.77 baht per share, beating the 3.63 baht per share consensus estimate of 3 analysts. Revenues were up 10.94%, while earnings were down 3.08%, over the same period the previous year.
The better-than-expected earnings were mainly because of a special profit following the reversal of 4.3 billion baht provision for its insurance unit SCB Life which was booked in the first-quarter, the bank said in a statement.
SCB's non performing loans stood at 2.77% of total lending at the end of June, versus 2.64% at the end of March, due to lackluster economic recovery. The bank's loan loss provision jumped 66% from a year earlier, to 8.51 billion baht, while its bad debt coverage ratio rose to 130% at the end of June, from 122.8% at the end of March, according to a SCB financial statement.
For 2015, SCB reported a dividend of 5.50 baht a share, which represented an 8.33% decrease from 2014. The 23 analysts covering the company expect dividends of 5.57 baht a share for the upcoming fiscal year, representing a year-over-year increase of 1.2%. The next earnings announcement from Siam Commercial Bank PCL is expected on October 17.
In mid-July, Digital Ventures, a new subsidiary of Siam Commercial Bank Group, launched a $50 million (1.7 billion baht) fund to invest in financial technology startups. Of that amount, $28 million will be invested directly in fintech start-ups, both in Thailand and globally, $20 million will be invested in a fund of funds, and $2 million will be invested in boosting Thailand's start-up ecosystem through DV Accelerate, according to the Nation. Investors may need to be aware that venture capital financing is typically high risk, as the failure rate for startups is very high.
Technically, SCB shares made a bearish double top reversal at around 200 baht during late 2014, and then pulled back sharply to the 112 baht level in January 2016, a 44% correction. The stock rebounded along with the broader SET50 index, and is now bumping into the upper trendline resistance of the descending channel chart pattern. There are several supports at the 144 and 150 baht levels, if SCB pulls back.
The Bank of Thailand warned on August 12 that the surge in NPLs associated with small and medium-sized enterprises (SMEs) and housing is expected to peak in the third-quarter, and will take a bite out of commercial banks' quarterly earnings, according to the Bangkok Post.
According to the Financial Times, the consensus amongst 27 polled investment analysts covering SCB gave the company an Outperform rating, with the median 12-month price target of 166 baht per share, as of August 19.
Disclosure: No position and no recommendation. |
