SIAM COMMERCIAL BANK is increasingly embracing digital banking to build an attractive business that can retain all customer segments and to lure foreign strategic partners seeking to cash in on the Asean Economic Community.
With global connectivity, digital banking will be critical in facilitating business for modern companies, especially modern SMEs, so the bank’s digital operating model is meaningful for serving customers both onshore and offshore, Yol Phokasub, president of the country’s third largest bank by assets, said last week.
Having partners is important for SCB to deal with the AEC, since they will select anyone who can help support them and their customers, he said.
Mobile and online channels will be the main platform for serving individuals and businesses.
Arthid Nanthawithaya, deputy executive chairman and chief executive officer of SCB, said many mergers and acquisitions assignments have proved that even if SCB doesn’t have branches overseas, it can help Thai customers and foreign companies to clinch deals.
SCB positions itself as a Thai bank, not a regional bank, so the priority is to increase its capability to help Thai companies in running their businesses in Thailand and abroad and to serve foreign companies doing business in this country.
The return from international business is small and the bank doesn’t have stakes in international markets like some Thai banks.
SCB has branches and representative offices in seven countries.
Commercial customers including SMEs account for 57 per cent of its Bt1.8 trillion loan portfolio.
In the first quarter, large businesses contributed to loan growth at the bank, while mortgages were the key driver of retail loans.
It plans to increase non-interest income closer to interest income so that their ratio will approach 45:55.
Due to the size of its loan portfolio, changing the percentage of non-interest income will take time. However, non-interest income has grown steadily over the past few years.
With the digital platform, the gap between non-interest and interest income will become narrower.
SCB, which is undergoing organisation restructuring, continued to perform well in the first quarter despite the extraordinary charges from the KMITL deposit account scandal.
SCB’s loans in the first quarter expanded by 1.8 per cent from the end of last year. Its non-performing loan ratio decreased to 2.11 per cent from 2.13 per cent at the end of last year. Yol said performing while transforming helps make the bank more attractive in the minds of customers and partners.
Since last year, SCB has been braking its lending especially for SME, auto and unsecured loans, as those customers have been hobbled by the economic uncertainty.
Even though it is booking fewer loans, the bad debt ratio remains unchanged, which means the bank can manage net new NPLs. If lending is gunned again, NPLs could improve from the present.
The bank has adopted a new credit scoring system, which has been implemented for housing, small business and auto loans and is expected to be applied to unsecured loans by year-end.
“The previous credit system showed incorrect figures. We cannot evaluate applications from only one dimension. We adopted C-score from only A-score by evaluating the value of a customer’s relationship with the bank,” he said.
SCB sees consumer confidence as a main driver of the economic recovery, while the government’s infrastructure investment needs time to generate positive results for the economy.
Unsecured loans will not be a driver of loan growth in retail banking this year, while auto loans are showing good signs and should be one of the retail loan drivers besides mortgages.
SCB projects growth of 5-7 per cent this year for both its own loans and the banking industry’s loans.
Last year, SCB posted loan growth of 2.4 per cent.
The bank is considering revising its loan growth target over the next three months pending the economic momentum figure in the second half of this year.
The bank’s Economic Intelligence Centre predicts GDP will grow not over 3 per cent this year, based on exports dropping 1.3 per cent, he said.
The centre expects the Monetary Policy Committee to trim its benchmark rate again by 25 basis points to 1.25 per cent.
“We suspect the economy has bottomed out and has been picking up since the second quarter. However, the bank’s next step amid the expected economic upturn must be taken carefully,” he said.