SIAM COMMERCIAL BANK PCL

SIAM COMMERCIAL BANK PCL

THANACHART BANK DAY 2013

7 June 2013

The Siam Commercial Bank PCL. | Thanachart Bank Day | June 2013

Review of Result – 1Q13

Economic Outlook and Strategic Thrusts

20-21

Agenda

1.

2.

IMPORTANT DISCLAIMER: Information contained in this document has been prepared from several sources and the Bank does not confirm the accuracy and completeness of such data, particularly where the data is sourced from outside the Bank. In addition, any forward looking statements are subject to change as a result of market conditions and the final result may be different to that indicated. The Bank makes no representation or warranty of any type whatsoever on the accuracy or completion of the information contained herein. In addition, the information provided is preliminary and subject to change following completion of the audit review.

Page

– Overview

– Net Profit

– NII

– Asset Quality

– Non-NII

– Deposit

– Cost Efficiency

– Capital

– Competitive Positions

3

4

5

9

11

13

15

16

17

3-18


1/ Following the adoption of deferred tax accounting in 2013, the 2012 ROE and ROA will be restated as 19.7% and 1.9%, respectively, while 1Q13 ROE will be 23.7%. 2/ Excluding Bt 5.1bn one-time investment revaluation gain on acquisition of additional shares in SCB Life in 1Q11. If this gain was included, the 2012 Non-NII growth would

stand at 0.9%.

1Q13 RESULTS AHEAD OF ALL TARGETS

1Q13 ACTUAL

ROE

ROA

NIMs

Total loan growth (yoy)

Non-NII growth (yoy)

Cost to income

NPLs (gross)

2012 ACTUAL

19.9%1/

2.0%1/

3.18%

19.7%

15.3%2/

41.2%

2.13%

2013 TARGETS

PROFITABILITY

LOAN

COST AND INCOME

ASSET QUALITY

19-22%

1.9-2.2%

3.1-3.2%

12-15%

40-42%

≤2%

12-14%

23.5%1/

2.3%

3.11%

18.2%

36.6%

2.06%

21.7%

1Q13 RESULT (Highlights)

- Record quarterly net profit of Baht 13.1 billion (growth of 26.8% yoy)

- Robust loan growth of 18.2% yoy across all business segments especially in areas where the Bank had targeted for market share gains: SME, auto, and housing loans

- Strong Non-NII growth in net fee and insurance premium and dividend income

- NPLs dropped to 2.06% of total loans – lowest level post-1997 crisis

= On track to meet or exceed the targets


NET PROFIT WITH HIGH ROE & ROA

Solid profitability reflected in high ROE and ROA Net profit increased by 26.8% yoy in 1Q13 to Baht 13.1 billion, while operating profit increased by 27.7% yoy to a record Baht 18.7 billion

Net Profit* (Baht billion)

ROE* (Percentage)

ROA* (Percentage)

Operating profit (Baht billion)

1Q12 2Q12 3Q12 4Q12 1Q13

21.6% 20.4% 19.8%

18.4%

23.5%

1Q12 2Q12 3Q12 4Q12 1Q13

2.2% 2.0% 1.9% 1.8%

2.3%

+26.8% yoy

+34.1% qoq

+27.7% yoy

+19.7% qoq

Net Profit

* Following the adoption of deferred tax accounting in 2013, the prior quarter amounts for net profit, ROE, and ROA will be restated as follows: Net profit of Bt 10.0bn, 9.8bn, 10.1bn, and 9.3bn for 1Q12 through to 4Q12, respectively; ROE of 21.2%, 20.2%, 20.2%, 17.8%, and 23.7% for 1Q12 through to 1Q13, respectively; and ROA of 2.1%, 2.0%, 1.9%, and 1.7% for 1Q12 through to 4Q12, respectively.


STRONG GROWTH IN NII…

Net interest margin declined slightly yoy and came in flat qoq as a result of lower interbank and investment yield following the policy rate cuts in 1Q12 and 4Q12. However, this is still in line with the Bank’s full year target range of 3.1 – 3.2% for 2013.

The growth in NII yoy was the result of robust loan growth, a larger component of higher yield loans and a larger portfolio of investments in government securities.

Net Interest Income (Baht billion)

Yield of Earning Assets, NIM and Cost (Percentage)

Yield on Loans 6.02% 6.13% 6.21% 6.20% 6.12%

Cost of Deposits 2.20% 2.24% 2.36% 2.49% 2.34%

+21.6% yoy +4.0% qoq

NII

Yield on Earning Assets

Net interest margin

Cost of funds


13.7%

-10.0%

0.0%

10.0%

20.0%

30.0%

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

E

CONTINUED LOAN GROWTH MOMENTUM IN 1Q13 DRIVEN BY MARKET SHARE GAINS IN KEY SEGMENTS (SME & RETAIL)

Banking Sector Loan Growth

Loan Growth (%yoy)

SCB Loan Growth

18.2% at end-1Q13

12-14%1/

Global financial crisis; SCB tightened credit underwriting standards from October 2008

Outcome of market share growth strategies in mortgage, auto and medium/small SME segments plus anticipation of credit cycle ahead of the market

1/ The 2013 loan growth projection for the sector, by SCB-EIC, was recently revised upwards from 9-12%. Source: Bank of Thailand’s website (for sector loans growth)

Credit Up-Cycle

Consolidation of SCBL and strong growth in large SME segment

19.7%


…DRIVEN BY ROBUST LOAN GROWTH ACROSS ALL SEGMENTS…

Wholesale 37.1%

(41.1%)

SME 19.8%

(18.9%)

Retail 43.1%

(40.1%)

Loans breakdown1/ as at Mar 31, 2013

Wholesale Loans1/ (Baht billion) SME Loans1/ (Baht billion)

Market Share ‘Top 3’ Market Share co-#3

Retail Loans1/ (Baht billion)

Loans1/

(Baht billion)

621

Mortgage +22.4% yoy, +6.4% qoq

Auto +40.5% yoy, +6.0% qoq

Others2/ +25.1% yoy, -4.0% qoq

(market share 16.4%3/, #3)

(market position #1)

The solid loan growth of 18.2% yoy was broadly based across all business segments, with much of it attributed to the Bank’s strategy to focus on market share growth in the SME, auto and housing loan segments.

+18.2% yoy +3.0% qoq +6.7% yoy

-0.6% qoq +24.2% yoy +5.8% qoq

Market share #1 +27.1% yoy, +5.1% qoq

541 579

( ) : Loan breakdown as at Mar 31, 2012

1/ Includes loans classified as NPLs 2/ Others includes mainly credit cards and unsecured consumer loans 3/ Market share among the top 5 auto loan lenders, excluding ‘captive’ finance companies, as of December 2012

Loans Growth

653 687


1Q12 4Q12 1Q13

Total Loans Yield % 6.02% 6.20% 6.12%

Change qoq 5 bps -1 bps -8 bps

Wholesale Yield % 5.20% 5.06% 4.95%

SME Yield % 7.11% 7.18% 7.06%

Mortgage Yield % 5.79% 6.08% 6.05%

Auto Loans Yield % 5.76% 5.56% 5.58%

…AND A LARGER COMPONENT OF HIGHER-YIELD LOANS

As a result of the strategic focus to obtain market share gains in Retail and SME segments, 63% of total loans are now in these segments. Within retail, the proportion of higher yield products such as home equity loans have also increased. However, as a result of two rate cuts in 2012 (in January 2012 and October 2012), the yield has shifted downwards gradually.

Loan breakdown (Percentage)

Wholesale

SME

Mortgage

Auto lending Others1/

1Q12 2Q12 3Q12 4Q12 1Q13

41% 40% 39% 39% 37%

19% 19% 19% 19% 20%

26% 27% 27% 26% 27%

10% 10% 11% 11% 11% 4% 4% 4% 5% 4%

Higher-Yield Loans

1/ Others include mainly credit cards and unsecured consumer loans


NPLs fell to 2.06%, the lowest level since the 1997 crisis, in part due to the Bank’s pre-emptive strategies to prevent new NPL formation, improved collection workout practice for existing NPLs, and to an extent, the continued economic momentum throughout 1Q13.

The Bank’s provisioning guideline in 2013 is to set aside loan loss provisions of approximately 60-65bps of total loans outstanding on a bank-only basis. These credit costs incorporate prudential provisions for future uncertainties.

ASSET QUALITY CONTINUED TO IMPROVE AS REFLECTED BY THE LOWER NPL RATIO

Provisions (Consolidated, Baht billion)

+74.1% yoy -29.1% qoq

Asset Quality

Non-Performing Loans, Gross NPL Ratio, and NPL Coverage Ratio (Baht billion, %)

Gross NPL%

NPL Coverage Ratio

Non- Performing Loans

Credit Costs (bps)

44 68 56 94 64 +3.6% yoy +2.6% qoq

1/ Includes additional provisions of Baht 1.0 billion in 2Q12, Baht 1.0 billion in 3Q12, and Baht 2.0 billion in 4Q12, on a bank basis.

1/ 1/

1/


Special Mention (Baht billion)

1Q12 2Q12 3Q12 4Q12 1Q13

17.0

21.0 23.8

25.3 26.7

The yoy increase in new auto loans NPL formation in 1Q13 was mainly due to the increasingly higher proportion of used car loans which have a higher yield but a correspondingly lower loan quality.

NPL WELL MANAGED DESPITE THE IMPACT FROM THE FLOODING

NEW NPL

1Q12 4Q12 1Q13

Total Loans

NPL % 2.39% 2.13% 2.06%

New NPL % 0.14% 0.39% 0.24%

Wholesale NPL % 2.13% 1.95% 1.97%

New NPL % 0.01% 0.10% 0.01%

SME NPL % 5.31% 4.24% 3.63%

New NPL % 0.17% 0.26% 0.15%

Mortgage NPL % 1.95% 1.78% 2.01%

New NPL % 0.22% 0.59% 0.41%

Auto Loans

NPL % 2.26% 2.05% 2.24%

New NPL % 0.26% 0.28% 0.55%


1Q12 2Q12 3Q12 4Q12 1Q13

7.0 7.4 7.2 8.2 8.3

NON-NII REMAINS SOLID…

Non-NII rose 21.7% yoy as a result of solid growth in net fee and insurance premium income, as well as higher dividend income.

1/ Miscellaneous income includes income from equity interest in affiliated companies, dividend, and other income.

Non-Interest Income (Baht billion)

Non-NII % to total operating income 40% 42%

Net fee and net insurance premium % to total income 30% 28%

Gain (Loss) on Investment

Net fee and Net insurance premium

Net trading and FX Miscellaneous income1/

+21.7% yoy

+12.5% qoq

42%

29%

39%

29%

38%

28%

12.3

10.1 9.9 9.9 10.9

Non-NII


1Q12 1Q13

7.4% 6.7%

3.3% 3.2%

8.2% 7.9%

2.7% 2.8%

4.1% 4.0%

3.4% 3.5%

1Q12 1Q13

5.0 5.7

0.9

1.0 1.1

1.6

…FIRMLY ANCHORED UPON STEADY FEE AND INSURANCE INCOME

Net Fee and Insurance Premium Breakdown (Percentage of Total Income)

Net Fee and Insurance Premium by BU (Baht billion)

Net fee and insurance premium income increased significantly from higher net insurance premium income together with the higher fees from securities brokerage fees, card and mutual fund products as well as fee from loan-related transactions.

1/ Others include brokerage fee, fund transfer, remittance, etc. 2/ GMTS stands for Global Markets and Transaction Services, which includes

cash management, trade finance, corporate finance and corporate trust

GMTS3/

Bank cards

Net insurance premium

Other fees2/

Mutual fund

Loan related fee 7.0

8.3 +17.9% yoy

+44.6% yoy

+15.3% yoy

+12.5% yoy

Wholesale

SME

Retail

72

%

12

% 1

6%

%

Sh

are

69

%

12

%

19

%

% S

har

e

Fee and Insurance Premium Income

Total 29.0% 28.1%


+26.5% yoy

+2.6% qoq

1Q12 2Q12 3Q12 4Q12 1Q13

597 653 770 773 834

663 714

736 789 759

50 47

50 52 62

1Q12 2Q12 3Q12 4Q12 1Q13

1,433 1,496

1,582 1,640

1,680

STRONG DEPOSIT FRANCHISE SUPPORTIVE OF LOAN GROWTH

Total Deposits + BE1/

(Baht billion)

The strong growth in deposits was the result of the deposit campaigns launched over the period and the progressive shift from maturing bills of exchange1/ (B/Es) to deposit products. Following the new regulatory requirement effective from January 2012, banks were required to pay FIDF fees on B/Es. As a result, the Bank sharply curtailed the growth and/or renewal of B/Es, resulting in an 80.8% yoy and 7.4% qoq decline in B/Es in 1Q13. Many of these B/Es have been channeled to the Bank’s deposit products upon maturity.

Savings

Fixed

Current

1/ Bill of Exchange is a borrowing instrument and is akin to an uninsured deposit in the Thai market.

Bills of Exchange1/ (Baht billion)

Deposits (Baht billion)

CASA – Current & Savings Accounts (%)

+17.2% yoy

+2.5% qoq

-80.8% yoy

-7.4% qoq

124.4 81.9 27.0 25.8 23.9

1,309 1,414 1,555 1,614

1,656

54% 54% 51% 52% 50%

Deposit/BE Growth


96.3%

94.9%

85%

95%

105%

115%

1Q12 2Q12 3Q12 4Q12 1Q13

LIQUIDITY REMAINS AT A COMFORTABLE LEVEL

In 1Q13, the ‘loan-to-deposit and B/E’ ratio is within the Bank’s target loan-to-deposit (including B/Es) ratio range of 94-96%.

Loan to Deposit Ratio

Loan to Deposit

Loan to Deposit + Bills of Exchange (BE)1/

94%-96%

The Bank currently maintains its daily liquidity ratio at 20% or higher – measured as total liquid assets to total deposits and B/Es. If the ratio falls below 20%, immediate corrective action is considered.

28.3%

19%

22%

25%

28%

31%

1Q12 2Q12 3Q12 4Q12 1Q13

Liquidity Ratio

Liquid assets primarily comprise cash, deposits and bilateral repo with the Bank of Thailand as well as investment in government securities

1/ BE or Bills of Exchange are included in deposits as they are essentially akin to ‘uninsured’ deposits

20%

The Bank expects deposits (including BE) to grow in tandem with loan growth in order to keep LDR within a 94%-96% range.

Liquidity


1Q12 2Q12 3Q12 4Q12 1Q13

39.6% 40.1% 41.5% 43.2%

36.6%

IMPROVING COST TO INCOME RATIO

Cost-to-income ratio of 36.6% was significantly better than the 2013 full year target of 40-42%. The Bank’s capital expenditure continues to be effectively managed and reflects the ongoing investment in network expansion and the strategic systems enhancement initiatives required in the rapidly changing competitive landscape. The outlay on these investments is unlikely to have a significant impact on the cost-to-income ratio level in the near future.

Operating Expense (Baht billion)

Cost-to-Income Ratio (Percentage)

1Q12 2Q12 3Q12 4Q12 1Q13

9.6 10.1

10.8

11.9 10.8

+12.5% yoy -8.9% qoq

Cost Efficiency


Bank-Only

CAR

CET1/Tier I

SOLID CAPITAL BASE TO SUPPORT GROWTH AND EMERGING REGULATORY REQUIREMENTS

The Bank has adopted Basel III on a consolidated basis since January 1, 2013. The Bank believes this strong capital position is sufficient to withstand any potential shocks which may arise. This solid capital position also provides the Bank with flexibility to grow its business in a timely manner as and when more growth opportunities arise in the future.

Capital

15.6% 15.2% 17.4% 16.5% 16.1% 15.8%

10.7% 10.6% 11.5% 10.9% 11.5% 11.3%

1Q12 2Q12 3Q12 4Q12 4Q12E 1Q13

10.4% 10.4% 11.2% 10.6% 11.7% 11.5%

4.3% 4.1% 5.4%

5.1% 4.5% 4.5%

14.7% 14.4% 16.6% 15.6% 16.2% 16.0%

Tier I Tier II

Capital Adequacy Ratio (Consolidated)1/

Basel II Basel III

Common Equity Tier I

1/ Previous quarterly presentations reported data on bank-only basis but from Jan 1, 2013, the Bank adopted Basel III consolidated basis as the norm. Hence, the comparatives are now presented on a consolidated basis.


KTB KBANK SCB BBL

10.0% 11.1% 11.3% 14.1%

SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS

Highest Net Profit (Consolidated, Baht billion)

Highest Market Cap (Baht billion)

Highest ROA and ROE (Percentage)

High Tier I (Percentage)

1Q13 Net profit

Market Cap. – as at Mar 29, 2013

1Q13 ROA

1Q13 Tier I (Basel III – Bank only basis)

KTB BBL KBANK SCB

8.5 9.0 10.1

13.1

KTB BBL KBANK SCB

349 433

498 612

KTB BBL KBANK SCB

1.5% 1.5% 1.9%

2.3%

Source: Commercial banks’ 1Q13 financial results Source: Commercial banks’ 1Q13 financial results

Source: Stock Exchange of Thailand’s website Source: Commercial banks’ 1Q13 financial results

Competitive Positioning

1Q13 ROE

BBL KTB KBANK SCB

12.9%

18.3% 21.2%

23.5%

* Following the adoption of deferred tax accounting in 2013, the 1Q13 ROE will be restated as 23.7%.

*


SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS (cont’d)

KTB BBL KBANK SCB

46.0% 42.2% 40.0%

36.6%

Highest Loan Growth (1Q13 vs. 1Q12) (Percentage)

Highest Proportion of Non-NII (1Q13) (Percentage)

Lowest Cost to Income Ratio (1Q13) (Percentage)

Largest Branch & ATM Network (as at Mar 31, 2013)

# of Branches # of ATMs

KBANK BBL KTB SCB

844 1,035 1,109 1,152

KBANK BBL KTB SCB

7,689 7,855 8,278 8,779

1/ Including net insurance premiums less net insurance claims

Non Interest Income to Total Income 1/

BBL KTB KBANK SCB

5.4% 7.3% 11.1%

18.2%

KTB BBL KBANK SCB

32.9% 39.1% 40.1% 41.7%

Source: Commercial banks’ 1Q13 financial results Source: Commercial banks’ 1Q13 financial results

Source: Commercial banks’ 1Q13 financial results Source: Bank of Thailand’s website, National ITMX Company * KTB’s figure as of end-Feb 13

Competitive Positioning

*


Review of Result – 1Q13

Economic Outlook and Strategic Thrusts

3-18

20-21

Page Agenda

1.

2.


MACRO TRENDS FORECAST FOR 2013 (SCB-EIC PERSPECTIVE) Macro

Comment and outlook Key drivers 2012

Estimates (%)1/

2013E

1/ %YOY except for policy rate (% per annum) and exchange rate (THB/USD) Source: SCB EIC analysis as of May 2013 based on data from the Ministry of Commerce, Bank of Thailand, and Office of the National Economic and Social Development Board

GDP growth

Policy rate (end period)

Headline inflation

6.4

3.0

2.75

THB/USD (end period) 30.6

4.8-5.0

2.8

2.50

28.5-29

Deposit+B/E (sector-wide)

13.7

9.8

12-14

11-12

Loan growth (sector-wide)

Moderate growth of GDP driven mainly by domestic spending. Tight labor market, low inflation, and min-wage hike are supportive for household spending. Gov’t investment will play a bigger role in H2.

BOT is balancing growth and macro-prudential objectives. Domestic demand is losing momentum. However, it is not weak as loan growth remains robust. So a case for further rate cuts is not yet strong.

Stable global energy prices. Global energy price outlook is stable as major economies are still in slow down mode. As a result, inflation outlook is also stable.

There is room for THB appreciation. Both FDI and portfolio investment inflows are supportive of further THB appreciation. The appreciation trend is similar to other regional currencies.

Strong loan growth persists. Loans for personal consumption and business investment carry strong momentum from 2012 to support expansion of domestic spending.

High competition for deposits. Deposit+BE growth lagged behind loan growth in 2012. For this reason and a healthy loan growth, high competition for deposits is expected in 2013.


2013 STRATEGIC THRUSTS 2013 Thrusts

Strong drive within Retail towards launch of segment based innovative products (e.g. Affluent, 50+) and the corresponding shift towards growth from more customer-centric strategies

Capture market share in the Baht 20-50m SME loan segment

Build banking foundation in selected regional markets – to support both inbound/outbound investment flows to/from Thailand

Start to completely overhaul the ‘operations’ backbone of the Bank and drive towards a lean ‘factory-like’ environment with scalability and end-to-end quality

Launch skill-building programs, bank-wide, through a structured framework that leads to enhanced competitive capabilities

Substantial upgrade of core IT systems – ATM, Trade, Payments, Mobile banking – to take functionality, availability and scalability to the next level and provide a platform that is more supportive of the increasing mobility of end users.

1.

2.

3.

4.

5.

6.


END

IMPORTANT DISCLAIMER: Information contained in this document has been prepared from several sources and the Bank does not confirm the accuracy and completeness of such data, particularly where the data is sourced from outside the Bank. In addition, any forward looking statements are subject to change as a result of market conditions and the final result may be different to that indicated. The Bank makes no representation or warranty of any type whatsoever on the accuracy or completion of the information contained herein. In addition, the information provided is preliminary and subject to change following completion of the audit review.

SIAM COMMERCIAL BANK PCL

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