Siam Commercial Bank PCL DB Access Asia Conference 2012 May, 2012
Agenda Page 1. Review of Result 1Q12 3-17 2. Future Positioning 19-23 3. 2012 Targets 25 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 finalresult 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. The 1Q12 results are based on unreviewed financial statements and are subject to change following a review by the auditors. Page 2
1Q12 A RECORD QUARTER 2011 ACTUAL PROFITABILITY LOAN COST AND INCOME ASSET QUALITY CAPITAL DISTRIBUTION 2012 TARGETS 1Q12 ACTUAL ROE 18.4% 1/ 17-19% 21.6% ROA 1.9% 1/ 1.8-2.0% 2.2% NIMs 3.26% 3%+ 2/ 3.15% Total loan growth (yoy) 22.1% 12-14% 19.6% Non-NII growth (yoy) 20.7% 1/ ND 12.4% 1/ Net fee & insurance premium growth 26.8% 15%+ 9.2% Cost to income 42.9% 1/ 43-44% 39.6% NPLs(gross) 2.61% 2.5% 2.39% Capital Adequacy Ratio 14.5% ND 15.6% Tier I 11.2% ND 10.7% Branches 1,094 1,150+ 1,103 ATMs 8,459 8,500+ 8,536 1Q12 RESULT (Highlights) -Record high quarterly net profit ofbaht 10.3 billion(growth of 29.4% yoy) 1/ -Sharp loan growth of 19.6% yoyacross all business segments with significant gains in SME and Auto loans - Strong Non-NII growth in net insurance premium and net trading income -NPLsdropped to 2.39% of total loans despite the flood impact in the previous quarter = On track to target or higher ND = Not disclosed 1/ Excluding Bt 5.1bn one-time investment revaluation gain on acquisition of additional shares in SCB Life. If this gain was included, the 2011 Net Profitwould stand at Bt 36.3billion, the ROE at 21.3%, ROA at 2.2%, Non-NII growth at 37.9%, and Cost-to-income at 40.5%. 2/ Depends on the interest rate environment. Page 3
PERFORMANCE HIGHLIGHTS Page 1. Record Net Profit 5 2. 3. Robust loan growth across all segments Improved asset quality 6 8 4. Robust fee income and insurance premium growth 10-11 5. Strong deposit growth 12 6. Effective cost control 14 7. Solid capital base 15 Page 4
RECORD HIGH NET PROFIT WITH HIGH ROE & ROA Record Profits Net profit 1/ increased by 29.4% yoyin 1Q12 to Baht 10.3 billion, while operating profit increased by 24.8% yoyto Baht 14.7 billion Robust profitability with high ROE and ROA Net Profit (Baht billion) 1/ 8.0 8.1 8.4 6.7 +29.4% yoy 1/ +53.5% qoq 10.3 ROE (Percentage) 1/ 19.5% 18.8% 19.0% 14.8% 21.6% Operating profit (Baht billion) +24.8% yoy 1/ +31.9% qoq ROA (Percentage) 1/ 11.8 12.1 14.1 11.1 14.7 1/ 2.1% 2.0% 1.9% 1.5% 2.2% 1/ Excluding Bt 5.1bn one-time investment revaluation gain on acquisition of SCB Life shares. If this gain was included, the 1Q11 Net Profit would stand at Bt 13.1bnand Operating Profit at Bt 16.8bn, while 2011 ROE would stand at 31.9%and ROA at 3.4%. Page 5
ROBUST LOAN GROWTH, BALANCED ACROSS ALL SEGMENTS, INDICATIVE OF THE RECOVERY OF THE THAI ECONOMY AND STRONG FRANCHISE POSITION OF SCB Robust Loans Growth Loan growth of 19.6% yoywas broad-based while the qoqexpansion was mainly from SME and auto hire purchase segments, which were the direct result of SCB s market share growth strategies Loans 1/ (Baht billion) 1,128 +19.6% yoy +4.4% qoq 1,177 1,239 1,293 1,349 Wholesale Loans 1/ (Baht billion) SME Loans 1/ (Baht billion) Market Share Top 3 +10.5% yoy Market Share #4 +34.1% yoy +2.2% qoq +7.0% qoq 502 513 519 542 554 190 207 225 238 255 Loans breakdown 1/ (as at Mar 31, 2012) Wholesale 41.1% SME 18.9% Retail 40.1% Retail Loans 1/ (Baht billion) 436 457 496 513 541 45 48 52 58 56 92 98 116 118 130 300 311 328 336 354 +23.9% yoy, +5.5% qoq Others 2/ +24.7% yoy, -3.4% qoq Auto +42.1% yoy, +10.1% qoq (market share 15.9% 3/,#4) Housing +18.2% yoy, +5.4% qoq (market share 31% 4/, #1) 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 March 2012 4/ Market share for mortgage portfolio amongst commercial banks, comprising of housing loans and consumer loans secured with a mortgage, as of December 2011 Page 6
RESULTING IN STRONG GROWTH IN NII The growth in NII yoywas the result of strong loan growth, the higher interest rates, and the higher interest income from investments. Higher NII The improvements in yield on loans have led to higher net interest margin, despite the pressure on the cost of funds Net Interest Income (Baht billion) 12.6 13.5 13.5 +29.0% yoy +5.3% qoq 14.2 Yield of Earning Assets, NIM and Cost * (Percentage) Yield on Earning Assets Net interest margin Cost of funds 4.40% 4.77% 5.27% 5.27% 5.28% 3.09% 3.28% 3.33% 3.14% 3.15% 11.0 1.51% 1.76% 2.28% 2.49% 2.51% * In this quarter, the Bank started to accrue for the additionaldeposit protection fee on deposits and certain types of borrowings as will be formally announced by the regulatory bodies. Yield on loans by BU Wholesale 4.2% 4.5% 5.0% 5.1% 5.2% SME 6.0% 6.4% 6.7% 6.9% 7.1% Retail 6.0% 6.2% 6.4% 6.5% 6.7% Page 7
ASSET QUALITY CONTINUED TO IMPROVE AS SHOWN BY LOWER NPLs, WHILE COVERAGE ALSO INCREASED Improved Asset Quality NPLsfell to 2.39%, the lowest level in over a decade, due to proactive work-out practices, and the Bank s preemptive strategies to prevent new NPL formation. The improvement was broad based. (As a result of regulatory forbearance the full impact of the flood related NPLsis not yet reflected in the reported data at 31/03/2012. The Bank expects the NPLsmay rise in the 40-50 bps range as and when the normal rules are applied again.) Gross NPL ratio & NPL Coverage ratio (Percentage) 8% 5% 3% 0% 110.6% 3.05% NPL Coverage ratio Gross NPL% 127.1% 2.61% 131.6% 2.39% The Bank has set the normalized level of provisions at Bt 1.5bn for each quarter in 2012 as a cushion against the impact of the continued dislocation in the global capital markets which may impact the Thai economy, and the consequence of the severe floods in the 4Q11 which may be manifest later in the year. Provisions (Baht billion) 0.9 0.8 1.9 3.1 +70.1% yoy -52.9% qoq 1.4 * * NPL by Segment Wholesale 2.6% 2.3% 2.8% 2.3% 2.1% SME 8.2% 7.3% 6.2% 5.7% 5.3% Retail 2.3% 2.2% 1.8% 1.9% 1.9% Credit Costs (bps) 31 29 62 97 44 * Includes additional one-time provisions of Baht 1 billion in 3Q11 and Baht 2.3 billion in 4Q11. Page 8
STRONG AND INDEPENDENT RISK MANAGEMENT Effective Risk Management An effective Risk Management function The Bank has a robust Risk Management Framework with a corresponding governance structure, to ensure that risks are managed efficiently and effectively. The Risk Management Group reports directly to the President and is independent of the origination units. Over the past 9 years, the risk management group has not only grown in size but has, in addition, acquired the analytical and modeling capability necessary to monitor risk effectively. The Bank s effective credit risk management process has contributed to a steady improvement in asset quality, with the gross NPL ratio improving from 5.14% in 2008 to 2.39% as of March 30, 2012. has resulted in the highest ratings among Thai financial institutions Long-Term Foreign Currency Senior Unsecured Note 1/ Outlook BFSR 2/ Baa1 A3 Stable C- BBB+ BBB+ Stable - 3/ BBB+ BBB+ Stable C 1/ Rating assigned to the Bank s USD2.5bn Euro Medium Term Note (EMTN) program issued in 2011 2/ Bank Financial/Fundamental Strength Ratings 3/ S&P no longer assigns BFSR ratings to banks with effect from December 6, 2011 Page 9
STEADY NON-NII GROWTH MOMENTUM Strong Non-NII Non-NII, excluding gain on investment in 1Q11, has increased +12.4% yoyowing to higher net fee and insurance premium income, net trading income, and higher gain on investment. Non-Interest Income (Baht billion) 14.1 Gain (Loss) on Investment 8.3 9.9 8.2 +12.4% yoy +23.2% qoq 10.1 (excluding one-time gain on investment) Other income 1/ Gain on trading and FX 6.5 6.2 7.4 5.9 7.0 Net fee and Net insurance premium 2/ 45% 3/ 40% 42% 38% 42% Non-NII % to total operating income 32% 3/ 30% 32% 27% 29% Net fee and net insurance premium % to total income 1/ Other income includes income from equity interest in affiliatedcompanies, dividend income, and other operating income. 2/ From March 2011, bancassurancefee from SCB Life is eliminated on consolidation and reflected under net insurance premium hence it has been restated for other quarters to facilitate comparison. 3/ Excluding Bt 5.1bn one-time investment gain on SCB Life. If this gain was included, thenon-nii % to total operating income would stand at 56% and Net fee and insurance premium income % to total income at 26%. Page 10
ANCHORED ON CONTINUED GROWTH IN FEE INCOME Higher Fee and Insurance Premium Income Net fee and insurance premium income grew 9.2% yoyfrom a stronger focus on fee based activities in all business segments Wholesale, SME, and Retail The yoygrowth was mainly driven by higher fee income from insurance products, loan related fees, and card business Net Fee and Insurance Premium by BU (Baht billion) 68% 8% 23% % Share 6.5 1.5 0.5 4.4 1Q11 72% 12% 16% % Share 7.0 +9.2% yoy 1.1 0.9 5.1 1Q12 Wholesale -25.7% yoy 1/ SME +58.5% yoy Retail +15.3% yoy 1/ The yoydecrease in wholesale fee income was largely caused by a decline in corporate finance fees due to the absence of large deals in the current quarter. Net Fee and Insurance Premium Breakdown (Percentage) Others 2/ Loan related fee Mutual fund Bancassurance and net insurance premium GMTS 3/ Bank cards 12.2% 11.4% 10.0% 14.2% 10.8% 24.5% 18.7% 23.9% 1Q11 9.3% 28.2% 11.5% 25.5% 1Q12 2/ Others include brokerage fee, fund transfer, remittance, etc. 3/ GMTS stands for Global Markets and Transaction Services, which includes cash management, trade finance, corporate finance and corporate trust Page 11
STRONG DEPOSIT FRANCHISE SUPPORTIVE OF LOAN GROWTH Strong Deposit/BE Growth Deposits and Bills of Exchange (BE) 1/ continued to grow despite a large drop in BE given the new regulatory requirement under which banks will be required to pay deposit protection fee on BE. SCB therefore has curtailed the growth or renewal of BE, resulting in a 42.6% qoqdecline in BE in 1Q12. Some of these BE have been channeled to the Bank s deposit products on maturity. Total Deposits + BE (Baht billion) 1,185 1,270 1,365 1,401 +20.9% yoy +2.3% qoq 1,433 Deposits (Baht billion) 1,127 47 1,098 45 625 598 601 1,116 1,184 45 47 622 1,309 50 663 +16.2% yoy +10.5% qoq 454 455 470 516 597 Current Savings Fixed Bills of Exchange (Baht billion) +111.6% yoy -42.6% qoq CASA Current & Savings Accounts (%) 58.8 172.3 248.7 216.7 124.4 60% 59% 58% 56% 54% 1/ Bill of Exchange is a borrowing instrument and is akin to an uninsured deposit in the Thai market. Page 12
LIQUIDITY REMAINS AT A COMFORTABLE LEVEL The Bank s loan to deposit + BE 1/ ratio rose slightly in 1Q12, while the loan to deposit ratio improved as the Bank shifted its focus away from the BE products and towards deposits. Ample Liquidity The Bank monitors its liquidity daily and has set its minimum liquidity ratio (liquid assets divided by total deposits and BE) at 20%. This is well in excess of the regulatory threshold. Loan to Deposit Ratio Liquidity Ratio 115% 28% 26.3% 105% Loan to Deposit 103.1% 25% 94%-96% 95% 85% Loan to Deposit + Bills of Exchange (BE) 1/ 2008 2009 2010 2011 1Q12 94.1% The Bank expects deposits (including BE) to grow in tandem with loan growth in order to keep LDR within a comfortable range. 1/ BE or Bills of Exchange are included in deposits as they are essentially akin to uninsured deposits 22% 20% 19% Liquid assets primarily comprise cash, deposits and bilateral repo with the Bank of Thailand as well as investment in government securities Page 13
IMPROVING COST TO INCOME RATIO Effective Cost Control Operating expenses rose 16.9% yoyreflecting full consolidation impact of SCB Life (vs. one monthin 1Q11) and SICCO together with investments in network and capabilities to support business growth. Nevertheless, given strong total income, cost to income ratio fell to 39.6% from 41.2% in 1Q11 Operating Expense (Baht billion) +16.9% yoy -8.8% qoq Cost-to-Income Ratio (Percentage) 8.2 8.7 9.3 10.6 9.6 1/ 41.2% 42.0% 39.8% 48.7% 39.6% 1/ Excluding the one-time investment gain in 1Q11. If this gain is included, the costto income ratio would stand at 32.9%. Page 14
STRONG CAPITAL BASE TO SUPPORT GROWTH AND EMERGING REGULATORY REQUIREMENTS The Bank believes its solid capital position will provide the flexibility to grow its business in a timely manner as growth opportunities arise in the quarters to come, in addition to providing a cushion against unexpected shocks Capital Base Capital Adequacy Ratio (Bank only) Basel II Standardized Approach Tier II Tier I 14.6% 14.4% 15.0% 14.5% 15.6% 1/ 3.8% 3.7% 3.6% 3.4% 4.9% 10.8% 10.7% 11.4% 11.2% 10.7% 1/ Should the 2H11 net profit after dividend be taken into consideration, CAR would stand at 16.1%, while Tier I would stand at 11.2%. Page 15
SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS Highest Net Profit (Consolidated, Baht billion) Highest ROA (Percentage) Competitive Positioning 1Q12 Net profit 1Q12 ROA 6.4 8.1 9.0 10.3 1.2% 1.5% 2.0% 2.2% KTB BBL KBANK SCB Source: Commercial banks 1Q12 financial results Highest Market Cap (Baht billion) High ROE (Percentage) KTB BBL KBANK SCB Source: Commercial banks 1Q12 financial results Market Cap. as at Mar 30, 2012 196 353 369 488 1Q12 ROE 13.0% 19.2% 21.6% 22.4% KTB BBL KBANK SCB Source: Stock Exchange of Thailand s website BBL KTB SCB KBANK Source: Commercial banks 1Q12 financial results 1/ Excluding one-time investment gain on SCB Life recorded in 1Q11. If such gain was included, the Net Profit would stand at Bt 36.3bn, ROA at 2.2%, and ROE at 21.3%. Page 16
SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS (cont d) Highest Loan Growth(1Q12 vs. 1Q11) (Percentage) Highest Proportion of Non-NII(1Q12) (Percentage) Competitive Positioning 12.6% 14.4% 15.7% 19.6% Non Interest Income to Total Income 1/ 26.8% 36.8% 39.8% 41.7% KBANK KTB BBL SCB Source: Commercial banks 2011 financial results KTB BBL KBANK SCB Source: Commercial banks 2011 financial results Lowest Cost to Income Ratio(1Q12) (Percentage) Largest Branch & ATM Networks (as at Mar 30, 2012) 47.3% 41.4% 40.8% 39.6% # of Branches # of ATMs 993 1,033 1,103 * 6,878 7,491 7,636 836 8,536 KTB KBANK BBL SCB Source: Commercial banks 2011 financial results 1/ Including net insurance premiums less net insurance claims KBANK BBL KTB SCB BBL KBANK KTB * KTB sas of end-feb 2012 Source: Bank of Thailand s website, National ITMX Company SCB Page 17
Agenda Page 1. Review of Result 1Q12 3-17 2. Future Positioning 19-23 3. 2012 Targets 25 Page 18
MACRO TRENDS FORECAST FOR 2012 Macro Estimates (%) 1/ 2011 Key drivers 2012 Comment and outlook 0.1 5.6-5.8 Thai GDP growth will be driven more from domestic demand recovery following the floods in the last quarter, and less from exports due to a weaker global economy. 3.8 3.5-4.0 Government policies on wage and energy as well as increases in spending will keep pressure on inflation. 3.25 31.7 15.0 3.00 30-31 11.5 No further cuts as the economic recovery is gaining pace. Upside risk still minimal since core inflation is projected to remain within the target range of BoT. Long term trend of USD weakening against Asian currencies should continue, but with short term volatility from risk aversion. Loan growth will moderate from the exceptional growth last year, but remain robust from the need to repair and rebuild after flood. Headwinds include: more competition from SFI, lower 13.1 10.0 current account surplus, and new FIDF fee imposed on B/E. 1/ %YOY except for policy rate (% per annum) and exchange rate (THB/USD) Source: SCB EIC analysis as of April 2012 based on data from theministry of Commerce, Bank of Thailand, and Office of the National Economic and Social Development Board Page 19
KEY DELTA GROWTH DRIVERS OVER THE NEAR TERM (CONTINUING THE MOMENTUM FROM 2011) Delta Growth Major current initiatives to obtain market share growth, over and above business as usual: Wholesale Continued expansion of market share, particularly in terms of fee income from the larger enterprises in this segment SME Gain further momentum from new SME business model, centered around gaining market share in the smaller end of this segment Auto Loans Expansion of market share in the auto hire-purchase segment with the aim to be the #1 originator within 2-3 years, with a strong focus in 2012 on used car loans Page 20
SUSTAIN MOMENTUM IN CAPTURING HIGHER MARKET SHARE IN THE WHOLESALE SEGMENT Delta Growth Wholesale WHOLESALE Wholesale Loans 1/ (Baht billion) EXISTING POSITION Among the top 3 in wholesale lending FUTURE POSITION Market leading position in most fee-based products Remain as a top 3 lender Market Share Top 3 502 513 519 542 +10.5% yoy +2.2% qoq 554 STRATEGIC THRUST: Continued push to capture more wallet-share of fee income in the large enterprise segment Greater focus on capturing a clients value chain product clusters or supply chain network In-depth expertise in specific segments to develop compelling customer propositions and solutions Upgrade service delivery platforms to enhance user experience 1/ Includes loans classified as NPLs Wholesale Fee Income (Baht billion) Lower number of large deals in 1Q12 as compared to 1Q11 and 3Q11 1.5 1.2 1.9 1.1 1.1-25.7% yoy -0.4% qoq Page 21
CONTINUED EXPANSION OF MARKET SHARE IN THE SME SEGMENT Delta Growth SME SME SME Loans 1/ (Baht billion) EXISTING POSITION Ranked #4 in the market FUTURE POSITION Ranked top 3 in the market Increase the SME loan volume with substantial uplift in fee income Market Share #4 190 207 225 238 +34.1% yoy +7.0% qoq 255 STRATEGIC THRUST: Develop deepercustomer insights, particularly in terms of customer behavior and financial needs at each life stage of a business Adopt a solution based approach to address the current and future financial needs of each customer segment, with a strong focus on fee income Enhance SME risk management capabilities by balancing risk and returns and monitoring to ensure growth has sustained profitability 1/ Includes loans classified as NPLs SME Fee Income (Baht billion) 0.5 0.6 0.7 0.5 +58.5% yoy +59.6% qoq 0.9 Page 22
MAINTAIN LEADING POSITION IN KEY RETAIL PRODUCTS AND CONTINUE TO BUILD MARKET SHARE IN AUTO LOANS, PARTICULARLY USED CARS RETAIL Housing Loans (Baht billion) Delta Growth Retail EXISTING POSITION Leading positions in Mortgage, Credit Cards, Bancassurance STRATEGIC THRUST: FUTURE POSITION Maintain leading position in key products #1 in terms of loan origination for Auto loans Continue to build market share in auto loans with an emphasis on the used car segment Stronger focus on key customer segments through offering a differentiated proposition for each segment Further enhance product businessesthrough innovation in the product and delivery platform Increase productivity (end-to-end) of operations Hire Purchase (Auto loans and others) 2/ (Baht billion) Market Share 15.9% 2/3/, #4 84 105 92 1Q11 Market Share 31% 1/, #1 300 +25% yoy 1Q12 1Q11 311 +42% yoy 130 114 130 137 1Q12 328 1Q11 +14% yoy 1Q12 +18.2% yoy, +5.4% qoq 336 1Q11 +20% yoy 164 1Q12 354 253 290 1Q11 KK SCB TISCO BAY TCAP +15% yoy 1Q12 1/ Market share for mortgage portfolio amongst commercial banks, comprising of housing loans and consumer loans secured with a mortgage, as of December 2011 2/ SCB sfigures are for auto loans only while other banks' figures include other types of hirepurchase loans:plant, machinery, equipment, motorcycle, and loan facilities to dealers. 3/ Market share among the top 5 auto loan lenders, excluding captive finance companies, as of March 2012 Page 23
Agenda Page 1. Review of Result 1Q12 3-17 2. Future Positioning 19-23 3. 2012 Targets 25 Page 24
2012 ASPIRATIONS ~BASICALLY, WE CONFIRM OUR 2012 TARGETS 2011 ACTUAL PROFITABILITY LOAN 2012 TARGETS 1Q12 ACTUAL ROE 18.4% 1/ 17-19% 21.6% ROA 1.9% 1/ 1.8-2.0% 2.2% NIMs 3.26% 3%+ 2/ 3.15% Total loan growth (yoy) 22.1% 12-14% 19.6% COST AND INCOME ASSET QUALITY CAPITAL Non-NII growth (yoy) 20.7% 1/ ND 12.4% 1/ Net fee & insurance premium growth 26.8% 15%+ 9.2% Cost to income 42.9% 1/ 43-44% 39.6% NPLs(gross) 2.61% 2.5% 2.39% Capital Adequacy Ratio 14.5% ND 15.6% Tier I 11.2% ND 10.7% DISTRIBUTION Branches 1,094 1,150+ 1,103 ATMs 8,459 8,500+ 8,536 = On track to target or higher ND = Not disclosed 1/ Excluding Bt 5.1bn one-time investment revaluation gain on acquisition of additional shares in SCB Life. If this gain was included, the 2011 Net Profitwould stand at Bt 36.3billion, the ROE at 21.3%, ROA at 2.2%, Non-NII growth at 37.9%, and Cost-to-income at 40.5%. 2/ Depends on the interest rate environment. Page 25
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 finalresult 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. The 1Q12 results are based on unreviewed financial statements and are subject to change following a review by the auditors. Page 26