INVESTOR PRESENTATION

Transcription

1 INVESTOR PRESENTATION J.P. MORGAN THAILAND CONFERENCE 2011 Deepak Sarup, CFO 17 th March 2011

2 AGENDA Pages I. Review of Results II. Future Positioning III Targets 29 IMPORTANT DISCLAIMER: Information contained in this document has been prepared from several sources and the Bank cannot confirm, in all cases, the accuracy and completeness of such data, particularly where 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. 2

3 2010 PERFORMANCE VS. TARGETS Targets and Results 2009 Actual 2010 Target 2010 Actual Profitability ROE ROA NIMs Loan Growth Total Loans (yoy) Wholesale SME Retail Cost and Income Non-NII Growth (yoy) Fee income Growth (yoy) Cost to Income NPLs (gross) Branches/ATMs Capital Adequacy Ratio 15.5% 1.6% 3.4% 2.5% 9.4% -7.0% 3.7% 10.4% 10.9% 50.6% 4.41% 987/7, % 2/ 2/ 16%+ 1.8% % 7-10% 8-11% 10-13% 6-10% 17% 15%+ 51% 3.90% 1,040/7,700 ND 1/ 16.4% 1.7% 3.63% 12.6% 11.0% 14.4% 15.6% 17.7% 19.4% 50.5% 3.25% 1,019/8, % 2/ 2/ 2010 Results (Highlights): High loan growth of 12.6% yoy was the tangible outcome of the Bank s market-share growth strategies adopted in early 2010 Non-NII growth exceeded target driven by solid fee income growth of 19.4% yoy Cost to Income ratio lower than target, at 50% NPL ratio substantially lower than last year s and the 2010 target On track to target or higher ND = Not disclosed 1/ Depends on the interest rate environment 2/ Stripping out non-recurring. If non-recurring items are included, non-nii growth would be 7.7% in 2009 and 20.6% in 2010, while cost to income ratio would be 51.5% in 2009 and 50.0% in

4 KEY ACHIEVEMENTS IN 2010 Achievements Solid 2010 results with ROE of 16.4% and ROA of 1.7% High loan growth of 12.6% yoy and improving asset quality Robust fee income growth of 19.4% yoy World class level of customer and employee engagement Market leading positions in key product areas Improved productivity Solid capital base Page

5 THE SOLID INCREASE IN NET PROFIT WAS DRIVEN BY MARKET SHARE GROWTH IN ALL SEGMENTS Solid Results Net profit increased 16.6% yoy in 2010 and 26.3% yoy in 4Q10 Robust profitability with highest ROE and ROA among the big Thai banks Net Profit +16.6% yoy ROE (%) Operating Profit +15.0% yoy ROA (%) 5

6 HIGH LOAN GROWTH ACROSS ALL SEGMENTS High Loan Growth Loan growth of 12.6% yoy was broad-based while the qoq expansion was mainly from the wholesale, SME, and auto hire purchase segments, which were the direct result of the Bank s market share growth strategies for Loans 1/ 5% 37% 4% 38% +12.6% yoy 3% 39% Special Assets Retail Retail loans grew 15.6% yoy mainly from Housing loan growth (+10.3% yoy) was driven by the low interest rate environment, Government tax incentives, and the Bank s operational capabilities Auto hire purchase loan growth (+28.9% yoy) was the result of the Bank s growth-oriented strategy to enhance business volumes and market share in this segment Loan Growth (yoy) 21% 19% 37% 39% 19% 39% +5.6% +2.5% +12.6% SME 1/ Figures were restated to reflect the transfer of SME loans to Corporate Banking Group and Retail Banking Group in 1Q10 Wholesale SME growth of 14.4% yoy was the result of the Bank s new SME business model and specific strategies to penetrate the SME segment, particular at the lower end. Wholesale loan growth of 11.0% yoy was in line with the Bank s pro-active strategy to capture market share in the blue-chip corporate & public sector segments 6

7 LOAN-TO-DEPOSIT RATIO NOW AT A COMFORTABLE LEVEL Loan to Deposit As the Bank was successful in growing its deposit base through both special deposit campaigns and effective leverage of its strong retail franchise, the LDR was reduced to a comfortable level. Loan to Deposit 96.9% 93.3% Loan to Deposit + BE * Note : The ratios shown above included Thai Baht and foreign currencies. As at the end of 4Q10, if shown separately the individual ratios would have been :- Thai Baht : Loan to Deposit = 94.2%, Loan to Deposit + BE = 90.6% ; Foreign Currencies : Loan to Deposit = 161.2%, Loan to Deposit + BE = 161.2%. The higher ratio for foreign currencies arises as the Bank does not have a natural deposit base in foreign currencies and relies instead on other funding sources. * BE is included in deposits as they are essentially akin to uninsured deposits 7

8 IMPROVING NII FROM LOAN GROWTH AND BETTER SPREAD Higher NIM The growth in NII yoy was the result of strong loan growth and higher yield compared to Yield on Earning Assets, Cost, and NIM Yield on Earning Assets NIM Net Interest Income +6.0% yoy NIM excluding Dividend from Vayupak Cost of Funds NII Growth (yoy) +13.2% -5.2% +6.0% Yield on Loan Wholesale 4.1% 4.0% 3.9% 4.1% 3.9% SME 5.2% 5.2% 5.1% 5.1% 5.1% Retail 6.1% 6.0% 5.8% 5.8% 5.8% 8

9 IMPROVED ASSET QUALITY HAS LED TO HIGHER RESERVE COVERAGE AND LOWER CREDIT COSTS Improving Asset Quality NPLs fell to 3.25%, the lowest level in over a decade, due to debt restructuring, NPL sales, and the Bank s pre-emptive strategies to prevent new NPL formation. The improvement in asset quality was broad-based. Reserve coverage exceeded 100% for the second quarter in a row, partly as a result of the economic recovery and partly from the strength of the Bank s credit underwriting practices and risk management framework. Gross NPLs % NPL Loan Loss Reserve % LLR/NPL % NPL by Segment Wholesale 5.5% 3.6% 3.1% SME 7.3% 8.7% 7.0% Retail 4.3% 3.9% 2.4% Credit Cost 1/ (bps) / Annualized provisions as a % of average loans 9

10 ROBUST GROWTH IN FEE INCOME Fee income in 2010 grew 19.4% yoy. The growth was mainly driven by higher fee income from card business, bancassurance, and loan-related activities. In relative terms the contribution level from loan related fee increased by 80bps reflecting rising contribution from whole & SME activities. Fee and Service Income Breakdown Loan Related Fee Robust Fee Income Growth Outer Ring : 2010 Inner Ring : 2009 Fee income +19.4% yoy GMTS 1/ Bank Cards Others 2/ Mutual Funds Bancassurance Fee by BU Wholesale SME Retail / GMTS stands for Global Markets and Transaction Services, which includes cash management, trade finance, corporate finance and corporate trust 2/ Others include brokerage fee, fund transfer, remittance, etc. 10

11 WORLD CLASS LEVELS OF CUSTOMER AND EMPLOYEE ENGAGEMENT PROVIDE A STRONG AND CONTINUED COMPETITIVE EDGE Customer & Employee Engagement Voice of Employees (VOE) scores have improved sharply over the years, reaching World-Class * scores since 2008 and the highest level in 2010 Voice of Employees (measured by Gallup) Substantive and sustained improvement in customer engagement as Voice of Customers (VOC). SCB has achieved a World-Class * standard since 2006 Customer Engagement (measured by Gallup) ** Percentile Score on Gallup s VOE Global Database 18 th 51 st 87 th 89 th 92 nd* 88 th 92 nd* * World Class is defined as the 90 th percentile or higher on Gallup s VOE global database. Percentile Score on Gallup s VOC Global Database 53 rd 77 th 91 st* 92 nd* 93 rd* 89 th 94th * ** Primarily through sampling customers with interaction at branches. 11

12 RETAIL BANKING - KEY PRODUCTS Mortgage Lending: Maintained dominance with approximately 29% market share 1/ among commercial banks Leading Positions in Retail Products Credit Card: #1 in terms of total card spending with 16.5% market share 3/ Housing Loans 2/ Credit Card Spending +11.4% yoy +12.3% yoy 1/ Market share for mortgage portfolio comprised of housing loans and consumer loans 2/ Classified by product, including NPLs Bancassurance: #1 with 25% market share 4/ 3/ As of Nov-10 Mutual Funds: #2 with 25% market share Total Bancassurance Premiums 5/ Mutual Fund Assets under +27.4% yoy Management (AUM) +13.5% yoy 4/ As of Nov-10 5/ Total life premiums which include individual life & credit life (new premium & renewals) 12

13 2010 COST-TO-INCOME REMAINED BELOW FULL- YEAR TARGET Improved Productivity Operating expenses rose 8.6% yoy reflecting seasonal costs in the last quarter. Nevertheless, given strong total income, cost to income ratio fell to 50.0% from the 51.5% in Operating Expense +8.6% yoy % Cost-to-Income Ratio 1/ 1/ Including non-recurring items, if non-recurring items are excluded, cost-to-income ratio would be 50.6% in 2009 and 50.5% in

14 STRONG CAPITAL BASE TO SUPPORT GROWTH AND EMERGING REGULATORY REQUIREMENTS Solid Capital Base Capital Adequacy Ratio Basel II - Standardized Approach 15.2% 16.5% 15.5% Tier II Tier I Should the 2H10 net profit be taken into consideration, CAR would have been 16.7%, while Tier I would have been 12.8%. 14

15 SCB RETAINS A STRONG MARKET POSITION AMONGST THE BIG THAI BANKS Competitive Positioning Strongest Profitability with Highest ROE and ROA 2010 ROE 2010 ROA Highest Market Cap (as at Dec 31, 2010) Market Capitalization Capital Adequacy Ratio Solid CAR (as at Dec 31, 2010) Largest Branch & ATM Networks (as at Dec 31,2010) # of Branches # of ATMs 15

16 AGENDA Pages I. Review of Results II. Future Positioning III Targets 29 16

17 MACRO TRENDS FORECAST FOR 2011 Macro Estimates (%) * 2010 Key drivers 2011 Comment and outlook GDP growth Expect Thai GDP growth of % in 2011 on back of global economic slowdown 3.3 Headline inflation 3.5 Expect average crude oil price (WTI) of around USD 93 /bbl in 2011, rising 18%YOY, compared to 27%YOY in Inflation to accelerate on back of rising prices of palm oil and food 2.00 Policy rate (end period) 3.25 Expect hikes to be front-loaded and paused by THB appreciation 30.1 THB/USD (end period) 28.5 Expect THB to appreciate around 5% on back of USD weakening, especially against major Asian currencies 11.5** Loan growth (sector-wide) Expect growth of 5-6% in 2011 due to policy rate hike 5** Deposit growth (sector-wide) Expect milder growth as compared to loan growth mainly on back of decreasing current account surplus * %YOY except for policy rate (% per annum) and exchange rate (THB/USD). ** Based on information from commercial banks financial reports, as of December 2010 Source: SCB EIC analysis 17

18 LONG-TERM POSITIONING Positioning Vision The Bank of Choice STRATEGIC THRUST: To be the PREMIER UNIVERSAL BANK in Thailand through adopting a strong focus on key markets or segments and by rapidly responding to evolving customer needs, better leveraging SCB franchise strengths, and utilizing the implemented market leading infrastructure and systems. Mission To be the Premier Universal Bank in Thailand SUPPORTED BY: A dominant brand - 1 st Thai Bank (established in 1906) Large and growing customer base (11 million customers) Largest distribution network (1,019 branches & 8,006 ATMs * ) Commitment of major shareholders Full franchise licenses (Securities, Asset Management, Life and Non-Life Insurance) * As at 30 December

19 SCB LOAN GROWTH HAS TENDED TO BE WELL AHEAD OF THE MARKET, EXCEPT DURING THE RECENT GLOBAL CRISIS WHEN THE BANK ADOPTED A MORE CAUTIOUS STANCE Lending Outlook Market-share growth strategy in three areas (i.e. Wholesale, Auto Loans, and SME) will be key drivers of the bank s growth in the near future Loan Growth (% yoy) SCB Loan Growth The Bank adopted a cautious stance in lending since early 2008, beginning with the U.S. subprime crisis and the financial turmoil in late % 5-6% Banking Sector Loan Growth 19

20 STRONG FOCUS ON NON-NII SHOULD YIELD BETTER RESULTS Fee Outlook Given the Bank s strong focus to increase its fee income, the Bank has a medium-to-long term objective of non-interest income accounting for more than 40% of total income and the aggregate fee income contribution from Wholesale Banking and Business Banking (SME) to increase from the current level to above 30% of fee income % Non-NII to Total Revenue % Fee income contribution from Wholesale and SME as a % of total fee income 20

21 KEY DELTA GROWTH DRIVERS OVER THE NEXT 3 YEARS Key Growth Segments Major current initiatives to obtain market share growth, over and above business as usual: 1) WHOLESALE - Expansion of market share, particularly in terms of fee income from the blue-chip and the public sector enterprises segment 2) SME - Gain momentum from new SME business model, centered around gaining market share in small and medium scale businesses 3) AUTO LOANS - Expansion of market share in the auto hire-purchase segment and aim to be the #1 originator within 2-3 years 21

22 KEY GROWTH DRIVERS OVER THE NEXT 3 YEARS Key Growth Segments WHOLESALE EXISTING POSITION FUTURE POSITION (2013+) Among the top 3 in wholesale lending Market leading position in most fee-based products Remain as a top 3 lender Wholesale Loans +11.0% yoy +9.1% qoq % (yoy) STRATEGIC THRUST: Strategic relationship management: Better identify issues and opportunities faced by customers, leading to holistic solutions that meet specific customer needs Increase the fee-income proportion: Use of corporate finance and advisory services, embedded with treasury products, across the client base Wholesale - Fee Income +69.5% yoy +45.5% qoq +17% (yoy) Gaining wallet share: Increase market share by positioning the Bank as an enterprise s preferred Bank Service enhancements: Create better linkage between customers and SCB Group s products and delivery channels * 2011 fee income figure is for the whole year. 22

23 KEY GROWTH DRIVERS OVER THE NEXT 3 YEARS Key Growth Segments SME EXISTING POSITION FUTURE POSITION (2013+) Ranked #6 in the market with Bt 183bn loans 1/ Ranked #3 in the market Increase the SME loan volume by about Bt 150 bn over the next three years, with substantial uplift in fee income SME Loans +14.4% yoy +9.0% qoq +20% (yoy) STRATEGIC THRUST: SCB s SME Brand: Strengthen the SCB SME brand by anchoring marketing activities around core SME products Footprint: Expand nationwide footprint through establishing Business Relationship Centers in new areas Products: Introduce new products to expand the customer base and generate higher margins. Grow feebased income, by offering product packages and solutions SME - Fee Income * 2011 fee income figure is for the whole year % yoy +19.0% qoq 1/ Outstanding at end 2010 will be around Baht 150 billion after the last tranche of commercial loans (Bt 40bn) is transferred to commercial (wholesale bank) +30% (yoy) 23

24 KEY GROWTH DRIVERS OVER THE NEXT 3 YEARS Key Growth Segments AUTO LOANS EXISTING POSITION FUTURE POSITION (2013+) Ranked #1 in Mortgage, Credit Cards, Bancassurance Maintain existing #1 position in key products #1 in terms of loan origination for Auto loans SCB-Auto Loans (Baht Billion) +28.9% yoy +8.8% qoq +25% (yoy) STRATEGIC THRUST: Strengthen relationships with existing dealers: Using key account management programs Footprint: Develop relationships with new dealers Distribution network: Leverage the Bank s comprehensive retail banking platform to introduce new products such as My Car, My Cash SCB-Monthly Booking of New Auto Loan Contracts (Units x 1,000) +50% (yoy)

25 Products Coverage SHARPER, MORE AGILE WHOLESALE BANKING GROUP TO RESPOND TO SCALE AND COMPLEXITY CHALLENGES Reorganization WHOLESALE BANKING GROUP Corporate Banking (60+ groups, 7 industries) Commercial Banking (2,000+ groups, 8 industries) Corporate Finance Capital Markets Market Sales & Trading Global Transaction Services Loans 25

26 Strategy & Product Sales THE NEW SME BANKING GROUP SEGMENT MODEL ADOPTED TO RAPIDLY INCREASE MARKET SHARE Reorganization SME BANKING GROUP Medium Business (Sales > 75 MB to < 500 MB) Small Business (Sales > 10 MB to < 75 MB) Business Strategy & Development Product Program Development Process Enhancement Marketing Communication & Strategy MIS & Business Support 26

27 AN INVIGORATED RETAIL BANKING GROUP POSITIONED TO GROW OUT FROM ITS CORE AND CAPITALIZE ON EMERGING OPPORTUNITIES Reorganization Wealth Management Lines of Business Deposit Asset Management Bancassurance Private Banking Shared Channels for Origination & Servicing Branch E-Channels Direct Sales Lending Lines of Business Mortgage Auto Finance Credit Card S/SME Customer Segment Management & Retail Marketing Independent Credit Risk Function 27

28 AGENDA Pages I. Review of Results II. Future Positioning III Targets 29 28

29 2011 ASPIRATIONS Targets and Results 2009 Actual 2010 Target 2010 Actual 2011 Target Profitability ROE ROA NIMs 15.5% 1.6% 3.4% 16%+ 1.8% % 1/ 16.4% 1.7% 3.63% 16-18% % 3.6%+ 1/ Loan Growth Total Loans (yoy) 2.5% 7-10% 12.6% 10-12% Cost and Income Non-NII Growth (yoy) Fee income Growth (yoy) Cost to Income 10.4% 10.9% 50.6% 2/ 2/ 17% 15%+ 51% 17.7% 19.4% 50.5% 2/ 2/ ND 15%+ 50% NPLs (gross) 4.41% 3.90% 3.25% 2.9% Branches/ATMs 987/7,129 1,040/7,700 1,019/8,006 1,050+/9,250+ Capital Adequacy Ratio 16.5% ND 15.5% ND On track to target or higher ND = Not disclosed 1/ Depends on the interest rate environment 2/ Stripping out non-recurring. If non-recurring items are included, non-nii growth would be 7.7% in 2009 and 20.6% in 2010, while cost to income ratio would be 51.5% in 2009 and 50.0% in