Company Update 29 Jul 2016

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Siam Commercial Bank PCL (SCB)

Transformation plan is underway

► Analyst meeting on 28 Jul 2016.

► General details on SCB Transformation Program

unveiled, with the objective to strengthen its

foundation.

► Maintain FY16 earnings estimate at Bt50.9bn, up 7.9%

YoY. ► We upgrade our recommendation to BUY from HOLD,

with a new target price of Bt179.00, from Bt152.00.

New transformation plan is underway

We attended SCB’s analyst meeting yesterday, at which

management reviewed its 2Q16 results and announced the SCB

Transformation Program. Given the current state of the economy,

the upcoming National e-Payment scheme, and growing trend in

digital banking, SCB decided to embark on the transformation

program in a bid to strengthen its business foundation in the long

term, particularly in the area of technology, process, and people.

The program starts with Phase I aiming to improve customer

service in both traditional channels, i.e. branches, as well as new

channels, such as mobile banking, the initial impact of which is

anticipated to be more tangible in 2H16. The whole program is

expected to take around 2-3 years. Although the bank could not

give all of the details and investment cost figures at the moment,

it expects annual cost-to-income ratio to remain intact at 38-40%.

Reiterated FY16 assumptions

SCB kept its FY16 financial targets unchanged. In particular, loan

growth is maintained at 4-6% while net interest margin (NIM)

should be around 3.1-3.3%. FY16 cost-to-income ratio remains at

38-40%. Meanwhile, its NPL ratio should be no greater than 3.0%

and credit cost is kept at 115-125bps. Given these unchanged

targets, we reiterated our FY16 assumptions. First, we maintain

our loan growth assumption at 5.0% and NIM at 3.1%. Although

the bank has initiated the transformation program, we expect cost-

to-income ratio at 38.0%, in line with management’s guidance. We

also conservatively estimate FY16 credit cost to be 125bps. In

sum, FY16 earnings estimate is kept at Bt50.9bn, up 7.9% YoY.

BUY

TP: Bt179.00 Closing price: Bt159.50

Upside/downside 12.2%

Sector Banking

Paid-up shares (shares mn) 3,395

Market capitalization (Bt mn) 541,542

Free float (%) 62.81

12-mth daily avg. turnover (Bt mn) 1,072.43

12-mth trading range (Bt) 160.00/

112.00

Major shareholders (%)

The Crown Property 21.3

Vayupak Fund 1 by MFC 11.6

Vayupak Fund 1 by KTAM 11.6

Financial highlights

Source: SETSMART, AWS

Thailand Research Department

Mr. Warut Siwasariyanon,

License, No. 17923

Tel: 02 680 5041

Ms. Veeraya Rattanaworatip,

Assistant Analyst

2014 2015 2016E 2017E

Revenue (Btmn) 128,130 137,409 141,566 149,597

Net profit (Btmn) 53,335 47,182 50,910 53,981

EPS (Bt) 15.7 13.9 15.0 15.9

EPS growth (%) 6.2 -11.5 7.9 6.0

P/E (x) 10.2 11.5 10.6 10.0

BVPS (Bt) 83.9 90.5 99.4 109.3

P/BV (x) 1.9 1.8 1.6 1.5

DPS (Bt) 6.0 5.5 6.0 6.0

Div. yield (%) 3.8 3.4 3.8 3.8

ROE (%) 20.1 15.9 15.8 15.2

Company Update 29 Jul 2016

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Upgrade to BUY from HOLD

We upgrade our recommendation to BUY from HOLD with a new target price

of Bt179.00. The target price is based on a new prospective PBV of 1.8x, still

below long-term average PBV of 1.9x, and ROE forecast of 16.5%. As SCB

already set special provision in 1H16 to boost its coverage ratio to its comfort

level of 130.0%, we reckon there is less pressure on the bank to set aside

provisions in 2H16, which should create upside to its earnings.

Company Update 29 Jul 2016

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Income Statement (Btmn)

Year to 31 Dec 2014 2015 2016E 2017E 2018E

Interest income 123,381 122,462 125,387 138,238 150,441

Interest expense (42,281) (39,628) (40,578) (48,236) (56,235)

Net interest income 81,100 82,834 84,809 90,001 94,207

Non-interest income 47,030 54,574 56,757 59,595 62,575

Net operating income 128,130 137,409 141,566 149,597 156,782

Non-interest expense (48,089) (48,948) (53,795) (60,587) (63,497)

Pre-provision profit 80,041 88,461 87,771 89,010 93,285

Provision expense (13,214) (29,723) (23,491) (20,852) (20,081)

Pre-tax profit 66,827 58,738 64,281 68,158 73,204

Corporate tax (13,175) (11,498) (12,856) (13,632) (14,641)

Minority interest (317) (58) (514) (545) (586)

Net profit 53,335 47,182 50,910 53,981 57,978

EPS (Bt) 15.69 13.88 14.98 15.88 17.06

Statement of Financial Position (Btmn)

Year to 31 Dec 2014 2015 2016E 2017E 2018E

Cash 42,132 38,979 127,345 49,301 73,963

Interbank & money market items 291,615 260,943 302,065 323,209 334,678

Investments 502,808 537,000 558,472 591,965 627,468

Net loans 1,721,935 1,773,174 1,868,411 1,997,524 2,133,889

Properties foreclosed 9,721 10,558 10,769 10,985 11,204

Net premises and equipment 33,776 39,988 37,988 36,849 42,376

Other assets 97,717 113,668 107,875 115,426 134,662

Total assets 2,699,703 2,774,309 3,012,925 3,125,259 3,358,241

Deposits 1,895,343 1,890,729 2,065,506 2,178,915 2,300,193

Interbank & money market items 140,286 142,937 150,084 160,590 178,495

Liabilities payable on demand 7,400 8,484 8,908 9,532 10,199

Debts issued and borrowings 113,917 121,164 120,826 129,284 145,027

Other liabilities 256,459 303,302 328,878 274,085 313,305

Total liabilities 2,413,405 2,466,616 2,674,203 2,752,405 2,947,219

Paid-up capital 33,992 33,992 33,992 33,992 33,992

Capital surplus 11,124 11,124 11,124 11,124 11,124

Other components 21,915 17,926 17,926 17,926 17,926

Retained earnings 218,301 244,421 274,936 308,521 346,104

Total equity of the company 285,332 307,463 337,978 371,564 409,146

Minority interest 966 230 745 1,290 1,875

Total equity 286,298 307,693 338,722 372,853 411,022

Company Update 29 Jul 2016

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Income Statement (Btmn)

Year to 31 Dec 2Q15 3Q15 4Q15 1Q16 2Q16

Interest income 31,049 29,911 30,475 30,421 30,269

Interest expense (10,235) (9,840) (9,056) (8,751) (8,508)

Net interest income 20,814 20,070 21,418 21,670 21,761

Non-interest income 12,403 19,221 10,896 7,975 15,138

Net operating income 33,217 39,291 32,315 29,645 36,899

Non-interest expense (11,722) (11,914) (12,769) (11,541) (12,508)

Pre-provision profit 21,494 27,377 19,545 18,104 24,391

Provision expense (5,131) (16,002) (4,989) (5,010) (8,512)

Pre-tax profit 16,363 11,375 14,557 13,094 15,878

Corporate tax (3,132) (2,342) (2,747) (2,558) (3,018)

Minority interest (14) (15) (15) 10 (43)

Net profit 13,218 9,018 11,795 10,546 12,818

EPS (Bt) 3.89 2.65 3.47 3.10 3.77

Key Financial Ratios

Year to 31 Dec 2014 2015 2016E 2017E 2018E

Gross loans growth (%) 2.4 3.2 5.0 7.0 7.0

Net interest income growth (%) 11.1 2.1 2.4 6.1 4.7

Non-net interest income growth (%) (6.9) 16.0 4.0 5.0 5.0

Pre-provision profit growth (%) 5.0 10.5 (0.8) 1.4 4.8

Net profit growth (%) 6.2 (11.5) 7.9 6.0 7.4

NIM (%) 3.3 3.2 3.1 3.1 3.1

Cost to income (%) 37.5 35.6 38.0 40.5 40.5

Credit cost (bps) 75.2 164.6 125.0 104.7 94.2

ROA (%) 2.0 1.7 1.8 1.8 1.8

ROE (%) 20.1 15.9 15.8 15.2 14.9

EPS (Bt) 15.7 13.9 15.0 15.9 17.1

BVPS (Bt) 83.9 90.5 99.4 109.3 120.4

DPS (Bt) 6.0 5.5 6.0 6.0 6.5

Gross NPL ratio (%) 2.1 2.9 2.8 2.5 2.4

Coverage (%) 138.1 109.8 102.4 117.6 128.4

Tier 1 capital (%) 13.6 14.0 14.8 15.3 15.8

CAR (%) 16.9 17.2 18.1 18.6 19.2

D/E (x) 8.4 8.0 7.9 7.4 7.2

Loans to deposits (%) 93.8 97.0 93.2 94.5 95.8

P/E (x) 10.2 11.5 10.6 10.0 9.4

P/BV (x) 1.9 1.8 1.6 1.5 1.3

Dividend yield (%) 3.8 3.4 3.8 3.8 4.1

CG Report

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Score Range Number of Logo Description

90 – 100

80 – 89

70 – 79

60 – 69

50 – 59

Below 50

No logo given

Excellent

Very Good

Good

Satisfactory

Pass

N/A

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2015.

ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC EASTW EGCO GRAMMYHANA HMPRO INTUCH IRPC IVL KBANK KCE KKP KTB LHBANK LPN MCOT MINTMONO NKI PHOL PPS PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMARTSAMTEL SAT SC SCB SCC SE-ED SIM SNC SPALI THCOM TISCO TKT TMBTOP VGI WACOAL

AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP BMCL BOL BROOKBWG CENTEL CFRESH CHO CIMBT CM CNT COL CPF CPI CSL DCC DELTADEMCO ECF EE ERW GBX GC GFPT GLOBAL GUNKUL HEMRAJ HOTPOT HYDRO ICCICHI INET IRC KSL KTC LANNA LH LOXLEY LRH MACO MBK MC MEGAMFEC NBC NCH NINE NSI NTV OCC OGC OISHI OTO PAP PDI PEPG PJW PM PPP PR PRANDA PREB PT PTG Q-CON QH RS S&JSABINA SAMCO SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT SNPSPI SSF SSI SSSC SST STA STEC SVI SWC SYMC SYNTEC TASCO TBSPTCAP TF TGCI THAI THANA THANI THIP THRE THREL TICON TIP TIPCO TKTKS TMI TMILL TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUETSC TSTE TSTH TTA TTCL TTW TU TVD TVO TWPC UAC UT UVVNT WAVE WINNER YUASA ZMICOVNT WAVE WINNER YUASA ZMICO

2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH AMARIN AP APCOAQUA AS ASIA AUCT AYUD BA BEAUTY BEC BFIT BH BIG BJC BJCHIBKD BTNC CBG CGD CHG CHOW CI CITY CKP CNS CPALL CPL CSCCSP CSS CTW DNA EARTH EASON ECL EFORL ESSO FE FIRE FOCUS FORTHFPI FSMART FSS FVC GCAP GENCO GL GLAND GLOW GOLD GYT HTC HTECHIEC IFEC IFS IHL IRCP ITD JSP JTS JUBILE KASET KBS KCAR KGIKKC KTIS KWC KYE L&E LALIN LHK LIT LIVE LST M MAJOR MAKROMATCH MATI MBKET M-CHAI MFC MILL MJD MK MODERN MOONG MPG MSC MTIMTLS NC NOK NUSA NWR NYT OCEAN PACE PATO PB PCA PCSGH PDGPF PICO PL PLANB PLAT PPM PRG PRIN PSTC PTL PYLON QLT RCIRCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN SCP SEAOIL SIRISKR SMG SOLAR SORKON SPA SPC SPCG SPPT SPVI SRICHA SSC STANLY STPISUC SUSCO SUTHA SYNEX TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TICTIW TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR UMI UP UPFUPOIC UREKA UWC VIBHA VIH VPO WHA WIN XO

Source: Thai Institute of Directors (IOD)

Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors

Association (“IOD”) regarding corporate governance is made pursuant

to the policy of the Office of the Securities and Exchange Commission.

The survey of the IOD is based on the information of a company listed

on the Stock Exchange of Thailand and the Market for Alternative

Investment disclosed to the public and able to be accessed by a

general public investor. The result, therefore, is from the perspective of

a third party. It is not an evaluation of operation and is not based on

inside information.

The survey result is as of the date appearing in the Corporate

Governance Report of Thai Listed Companies. As a result, the survey

result may be changed after that date, Asia wealth Securities Company

Limited does not conform nor certify the accuracy of such survey result.

CG Report

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ขอมล Anti-Corruption Progress Indicator ของบรษทจดทะเบยน

ระดบ 1ACD AEONTS AFC AIRA AJ ALUCON AMC AQUA ARIP AUCT BAT-3K BIG BJCBLISS BMCL BOL BRR BSBM CBG CCET CCN CGD CMR CPH CSC CSPCTW DCON DRACO DSGT DTCI E EMC ESSO FOCUS FSMART GIFT GLANDGRAND GUNKUL HFT HTECH IHL ILINK ITD JSP KDH KTIS KTP LEE LSTMAJOR MATCH MAX M-CHAI MDX MIDA ML MPIC NC NEP NNCL NWR OHTLPICO PK PL PPM PRAKIT PRECHA PRIN PSTC PYLON RAM RICH RS SANKOSAUCE SAWAD SAWANG SCN SEAFCO SF SHANG SIRI SMART SMM SOLAR SPACK SPGSPPT SPVI STA STAR SVH SVOA SWC TAPAC TC TCCC TCJ TCOAT THTKS TNH TNPC TPA TPAC TPOLY TRC TRUBB TSE TTA TTI TTL TTTMTWP TWZ U UMS UPA UPOIC UTP UVAN VARO VI VIBHA VIH VTEWG

ระดบ 22S ABICO AF AKP AMARIN AMATA AOT APCO AYUD BEAUTY BFIT BH BKDBLAND BTNC CCP CI CSR CSS EFORL EPCO FE FNS FVC GEL GLOBALHEMRAJ IEC IFS INET JUTHA KASET KCAR KKC KSL L&E LALIN LTX MMALEE MBK MBKET MEGA MK MPG MTLS NCH NCL NPP OCC OCEAN PBPCA PRINC QH ROCK RPC S&J SGP SIAM SIS SKR SMG SMIT SORKONSUSCO TAKUNI TEAM TF TIC TIP TIPCO TMC TMI TPP TRT TRU TRUETSC TSI TTW TVD TVO UKEM UNIQ UWC VNG WIIK WIN XO

ระดบ 3AABC ACAP ADVANC AEC AGE AH AIE AMANAH ANAN AP APCS APURE ASASIA ASIAN ASIMAR BIGC BROOK BTS BWG CEN CENTEL CFRESH CHARAN CHO CHOTICM CNT COL CPALL CPF CPI CPL DELTA DEMCO DIMET DNA DTAC EAECF EE EVER FPI GBX GC GFPT GLOW HMPRO HOTPOT ICC ICHI IFECINOX INSURE IRC JAS JTS JUBILE KC KTC KYE LHK LPN LRH MAKROMC MCOT MFC MFEC MINT MJD MONO MOONG NBC NDR NINE NMG NSINTV OGC PACE PCSGH PDI PG PHOL PLAT PPS PR PRANDA PREB PSQLT RATCH RML ROBINS ROJNA RWI SAMCO SCCC SCG SEAOIL SE-ED SENA SINGERSITHAI SMK SMPC SPALI SPC SPCG SPI SRICHA SSI STANLY SUPER SVI SYMCSYNEX SYNTEC TASCO TCMC TFI THAI THRE THREL TICON TKT TLUXE TNL TPCORPTMILL TMT TSTE TSTH TTCL TU TVI UOBKH UREKA VGI VNT WACOAL WHAZMICO

ระดบ 3BAAV AHC AI AIT AKR ARROW ASK BA BDMS BEC BECL BJCHI BUICGH CHG CHOW CIG CITY CK CKP COLOR CWT EARTH EASON EPG F&DFANCY FIRE FMT FORTH GENCO GL GOLD GPSC GRAMMY HYDRO IRCP IT JCTKCM KWC LH LIT LOXLEY MACO MANRIN MATI MODERN MSC NOBLE NOK NPKNUSA OISHI OTO PAF PAP PATO PF PJW PLANB PLE POLAR PRG PTLQ-CON QTC RCI S11 SALEE SAM SAMART SAMTEL SAPPE SC SCP SFP SIMSLP SMT SPA SPORT SSC SST STEC STPI SUC SUTHA T TAE TBSPTCC TFD TGCI TGPRO THANA THIP TIW TK TMW TNDT TOPP TPC TPCHTPIPL TSR TT TYCN UAC UBIS UEC UMI UP UPF UT UV VPOWAVE WINNER YUASA

ระดบ 4ASP BAFS BANPU BAY BBL BKI BLA CIMBT CNS CSL DCC DRT DTCEASTW ECL EGCO ERW FSS GCAP HANA HTC INTUCH IRPC IVL KBANK KCEKGI KKP KTB LANNA LHBANK MTI NKI PSL PTG PTTEP SABINA SCB SNCSNP SSF SSSC TCAP THCOM TISCO TIMB TMD TNITY TOG

ระดบ 5BCP CPN GYT PE PM PPP PT PTT PTTGC SAT SCC THANI TOP

ไมเปดเผยหรอไมมนโยบายA ACC AJD AQ BCH BGT BROCK BSM BTC CHUO CPR CRANE EICFER JMART JMT KAMART KBS KIAT LDC MBAX MCS METCO NEW NEWS NYTPAE PDG PERM PMTA POST RCL RICHY ROH S SIMAT TCB TR TSFTVT WORKหมายเหตระดบ 1 : มนโยบายระดบ 2 : ประกาศเจตนารมณระดบ 3 : มมาตรการปองกน ซงทง 2 กรณ ถอเปนผลการประเมนในระดบเดยวกน

3A : บรษทมการประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค3B : บรษทมค ามน และนโยบายของบรษท แตมไดประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค

ระดบ 4 : ไดรบการรบรองระดบ 5 : ขยายผลสผท เกยวของ

Contact

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s

Branch Address Phone Fax

Head Office 540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,

Pathumwan Bangkok 10330

02-680-5000 02-680-5111

Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd., Silom,

Bangrak, Bangkok, 10500 Thailand

02-630-3500 02-630-3530-1

Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21 Road,

Klong Toey Nua, Wattana, Bangkok 10110

02-261-1314-21 02-261-1328

Pinklao

7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room

No.1605-1606 Baromrajachonnanee Road, Arunamarin, Bangkoknoi,

Bangkok 10700

02-884-7333 02-884-7357,

02-884-7367

Chaengwattana

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room

2204 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi 11120

02-119-2300 02-835-3014

Chaengwattana 2

9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,

Room 2203 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi

11120

02-119-2388 02-119-2399

Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road,

Bangkaew Bangplee, Samutprakarn 10540

02-106-7345 02-105-2070

Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District, Rayong

Province 21000

038-808200 038-807200

Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen

40000

043-334-700 043-334-799

Chonburi 55/22 Moo 1, Samed Sub District, Muang District, Chonburi 20000 038-053-858 038-784-090

Chaseongsao 233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-District,

Meung District, Chachoengsao 24000

038-981-587 038-981-591