ธนาคารไทยพาณิชย์ (SCB) - 2018 Financial Results · 2019-10-17 ·...

Page 0 / 43Siam Commercial Bank PCL. | Analyst Meeting Presentation | 21 January 2019

Analyst Meeting Presentation

21 January 2019

2018 Financial Results

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. Inaddition, 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 whatsoeveron the accuracy or completion of the information contained herein.


PageAgenda

Review of 2018 Results 2-221.

Economic Outlook & Business Direction 30-373.

2019 Targets 394.

SCB Transformation Update 24-282.


(Consolidated)

2017Actual

2018

Targets

2018 Actual

Total Income growth (yoy) +2.2% N.A. +1.5%

Net Interest Income (NII) growth (yoy) +4.4% N.A. +4.4%

Non-NII growth (yoy) -2.2% Up to 5% -4.7%

Cost/Income ratio 42.3% 45-47%* 46.8%

Net Profit growth (yoy) -9.4% N.A. -7.1%

Total loan growth (yoy) 4.9% 6-8% 5.2%

Net Interest Margin 3.23% 3.1-3.3% 3.21%

NPLs (gross) 2.83% ≤ 3.0% 2.85%

Coverage ratio 137.3% >130% 146.7%

ROE 12.4% N.A. 10.8%

ROA 1.45% N.A. 1.29%

CAR 17.7% N.A. 17.1%

CET1/ Tier 1 15.6% N.A. 15.1%

Strong core performance despite elevated cost from the Transformation Program and higher prudent provisions

PROFITABILITY

2018 Highlights

2018 net profit was Baht

40.1 billion, a 7.1% yoy

decrease due mainly to higher

OPEX from transformation-

related investments, and

lower non-NII.

NIM remained stable at

3.21%, in line with the annual

target of 3.1-3.3%.

Non-NII declined by 4.7% yoy

mainly from lower net

insurance premium and net

fee income, while net gain on

trading and net gain on

investments increased.

Cost/Income ratio of 46.8%

was within the full year

guidance of 45-47%.

Coverage ratio was strengthened

to 146.7% with additional

prudent provisions set in

4Q18 while NPL ratio was

relatively stable at 2.85%.

* Revised per Board of Directors’ resolution on 19 July 2018; N.A. = Not Available

INCOME/COST

LOANS/ASSET

QUALITY

CAPITAL

2018 Results


2018 performance highlights

NII96.4 bn(+4.4% yoy)

Healthy NII growth driven by 5.2% loan growth

• Retail and corporate segments continued to drive the overall loan growth

• However, loans grew slightly below the 2018 target (6-8%) due to slower growth in SME and housing loans

Non-NII 41.9 bn(-4.7% yoy)

Weak Non-NII growth from digital fee waiver and lower net insurance premium

• Lower transaction fee and weak net insurance premium put pressure on fee income

• In 2019, wealth management will be the key driver for fee income

Expense 64.6 bn(+12.1%yoy)

Elevated operating expense from Transformation-related investment

• 2018 cost-to-income ratio rose to 46.8%, in line with target

• The cost-to-income ratio is expected to decline from 2019 onwards

Net

Profit40.1 bn(-7.1% yoy)

Net profit of Baht 40.1 billion

• Higher operating expenses from the Transformation Program, lower non-NII and prudential provisions set in 4Q18 put

pressure on net profit

Provisions 24.0 bn(-4.2% yoy)

Higher provisions in 4Q18 against macroeconomic uncertainty • The Bank set aside prudential provisions of Baht 8.9 billion

• Higher level of provisions reflects the Bank’s prudential provisioning against macroeconomic uncertainty and heightened

volatility and at the same time the Bank is shifting its loan portfolio towards unsecured products and digital lending

2018 Results


%YoY

33.8Total Operating income 1.5%

24.8- NII 4.4%

8.9Provisions -4.2%

7.1Net profit -7.1%

9.0- Non-NII -4.7%

16.1Operating expenses 12.1%

2018

138.2

96.4

24.0

40.1

41.9

64.6

%YoY

-1.7%

4.7%

18.4%

-23.0%

-15.8%

4.7%

17.7Operating profit -6.3%73.6

%QoQ

-2.7%

1.7%

72.8%

-32.6%

-13.1%

-2.3%

-3.1% -6.8%

4Q18(Baht billion)

Financial Summary – 2018/4Q18 Financial Results

2018 Results


2018 net profit was under pressure from Transformation-related cost

1/ Net profit before impairment provisions, non-controlling interest, and taxes.

Despite modest growth in total income, higher operating expenses from new technology investments and customer acquisition initiatives under the Transformation

Program resulted in a 7.1% yoy decrease in net profit. On a quarterly basis, net profit fell 23.0% yoy because of prudent provisions in 4Q18 as well as lower net gain on

trading and net insurance premium.

Net Profit and Operating Profit1/

(Baht billion)

2017 2018 4Q17 1Q18 2Q18 3Q18 4Q18

43.2 40.1

9.2 11.4 11.1 10.5 7.1

78.6 73.6

18.9 19.1 18.6 18.2 17.7

-6.3% yoy

-7.1% yoy

-6.8% yoy

-3.1% qoq

-23.0% yoy

-32.6% qoq

OperatingProfit

Net Profit

Profitability


Total operating income continued to grow mainly from higher interest income

Total operating income grew 1.5% yoy in 2018 mainly driven by net interest income growth. On a quarterly basis, total operating income decreased by 1.7% yoy

due to lower net gain on trading and net insurance income.

Total Operating Income(Baht billion)

Non-NII

NII

+1.5% yoy

-4.7% yoy

-1.7% yoy

-2.7% qoq

+4.4% yoy

2017 2018 4Q17 1Q18 2Q18 3Q18 4Q18

32.2% 30.3% 31.0% 34.0% 30.6% 29.8% 26.6%

92.3 96.4

23.7 23.3 23.8 24.4 24.8

43.9 41.9

10.7 12.0 10.5 10.3 9.0

136.2 138.2

34.4 35.4 34.3 34.7 33.8

+1.5% yoy

-4.7% yoy

+4.4% yoy

-13.1% qoq

+1.7% qoq

-15.8% yoy

+4.7% yoy

-1.7% yoy

-2.7% qoq

%Non-NII/Total income

Total Income


Healthy NII growth was driven by loan growth and stable NIM

In 2018, NII rose by 4.4% yoy due to higher loan growth and effective deposit cost management. On a quarterly basis, NII increased by 4.7% yoy largely

driven by loan growth of 5.2% yoy and higher interest income from interbank and money markets.

Net Interest Income(Baht billion)

Yield on Earning Assets

Yield on Loans1/

Cost of Funds

Costs of Deposits

Net Interest Margin (NIM)

Loan Growth(%yoy)

+4.4% yoy

+4.7% yoy

+1.7% qoq

2017 2018 4Q17 1Q18 2Q18 3Q18 4Q18

4.38% 4.30% 4.39% 4.26% 4.31% 4.34% 4.38%

5.38% 5.27% 5.36% 5.19% 5.25% 5.30% 5.32%

1.45% 1.40% 1.41% 1.39% 1.40% 1.40% 1.44%

1.38% 1.31% 1.36% 1.31% 1.31% 1.30% 1.35%

92.3 96.4

23.7 23.3 23.8 24.4 24.8

3.23% 3.21% 3.28%3.18% 3.21% 3.26% 3.26%

4.9% 5.2% 4.9% 5.7% 6.7% 5.5% 5.2%

1/ One-sided lending rate cut in May 2017

NII


Deposits grew moderately with a higher CASA ratio

Deposits grew both yoy (+3.2%) and qoq (+1.7%) from higher savings deposits, while fixed deposits declined after the 15-month fixed deposit campaign ended in

3Q18. Consequently, the Bank’s CASA further improved to 68.9% at the end of 2018.

Deposits(Baht billion)

2,092 2,093 2,146 2,123 2,160

-12.9% yoy

+10.7% yoy

-8.1% yoy

4Q17 1Q18 2Q18 3Q18 4Q18

Current & Savings Accounts (CASA)

65.0% 68.1% 68.1% 68.3% 68.9%

+3.2% yoy

-5.8% qoq

+2.9% qoq

+0.1% qoq

+1.7% qoq

732 668 685 672 673

1,282 1,352 1,391 1,379 1,419

78 73 70 72 68

Savings

Current

Fixed

Deposits


Loan growth for SCB edged up slightly, in line with GDP growth

1/ In 2006, the Bank increased its holding in SCB Leasing (then Thai Panich Leasing PCL) from 37.6% to 95.5%.2/ SCB EIC’s estimation as of January 2019

Source: Bank of Thailand’s website (for sector loans growth)

Credit Cycle

4.9%5.2%

-10.0%

0.0%

10.0%

20.0%

30.0%2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019F

5-7%

7%2/

Loan Growth(%yoy)

SCB Loan Growth

Global

financial crisis;

SCB tightened

credit

underwriting

standards

SCB’s market

share growth

strategies in

mortgage, auto

and SME segment

SCB’s

acquisition of

SCB Leasing1/

and market

share gains in

SME segment

Thailand’s

economic

slowdown

2019 SCB Loan

Growth Target

Banking Sector Loan Growth

Estimated Sector

Loan Growth by EIC

5-6%2/


SME15.9%

(16.8%)

Corporate38.8%

(38.5%)

Housing30.1%

( 31.0%)

Auto9.5% (8.8%)

Others5.7% (4.9%)

Retail45.3%

(44.7%)

2018 loan growth was led by retail and corporate segments

( ) : Loan breakdown as at 31 Dec 2017

1/ Including loans classified as NPLs2/ Mainly credit cards and unsecured consumer loans3/ In 2Q18, some SME customers experienced sales turnover growth and were reclassified as Corporate loans.

Data for 31 Dec 2017 and 31 Mar 2018 are restated figures.

Loans grew 5.2% yoy mainly driven by retail and corporate segments, while SME loans declined qoq and yoy. Total loan growth was slightly below the Bank’s loan

growth target of 6-8% for 2018.

+5.2% yoy

+1.7% qoq

2,035 2,063 2,103 2,104 2,141

4Q17 1Q18 2Q18 3Q18 4Q18

Loans1/

(Baht billion)

Corporate Loans1/ 3/

(Baht billion)

SME Loans1/ 3/

(Baht billion)

+6.1% yoy

+2.3% qoq

783 804 828 812 831

4Q17 1Q18 2Q18 3Q18 4Q18

342 342 344 344

341

4Q17 1Q18 2Q18 3Q18 4Q18

-0.3% yoy

-0.9% qoq

Retail Loans1/

(Baht billion)Retail +2.3% qoq +6.5% yoy

Others2/+12.3% qoq +21.3% yoy

Auto +3.8% qoq +12.9% yoy

Housing +0.1% qoq +2.3% yoy630 632 637 644 645

180 187 192 196 203

100 98 102 108 121 910 918 930 947 969

4Q17 1Q18 2Q18 3Q18 4Q18

Auto +3.8% qoq +12.9% yoy

Others2/ +12.3% qoq +21.3% yoy

Retail +2.3% qoq +6.5% yoy

Loans Breakdown1/ as at 31 Dec 2018

Loans


2018 loan growth was slightly below the target of 6-8% due to slow growth in SME and housing loans

Amid economic slowdown and sluggish recovery, the Bank has tightened

underwriting criteria for SME lending stalling loan growth in SME segment.

294

349 341 357 365 342 341

23.2%18.8%

-2.4%

4.8% 2.2%

-6.1%-0.3%

2012 2013 2014 2015 2016 2017 2018

%YoY

growth

408 485 530 576 607 630 645

21.3%19.0%

9.3% 8.7%5.4%

3.7% 2.3%

2012 2013 2014 2015 2016 2017 2018

%YoY

growth

Housing loans(Baht billion)

SME loans (Baht billion)

The Bank rebalanced loans from housing loan segment to optimize risk-return

and reduce concentration. Despite slower growth in this segment, the Bank

continued to be the largest mortgage lender with a 29.4% market share (as of

September 30, 2018).

Loans


Asset quality was in line with the Bank’s expectation with SME showing sign of improvement both yoy and qoq

65.6 65.8 67.4 69.8 70.4

4Q17 1Q18 2Q18 3Q18 4Q18

The yoy increase in NPLs was mainly from the

corporate segment following qualitative loan

classification of one corporate customer in the

mining industry in 3Q18 and relapse of one

corporate customer in the auto parts industry

in 4Q18.

%NPL

51.7 48.6 53.4 50.4

54.0

4Q17 1Q18 2Q18 3Q18 4Q18

The qoq increase in special mention loans was

mainly from qualitative classification of some

corporate and SME customers.

Special Mention Loans(Baht billion)

11.4 9.7 10.6

12.2 11.8

4Q17 1Q18 2Q18 3Q18 4Q18

Overall %new NPL trended up yoy from housing

loans and corporate segments (due to qualitative

classification), but remained within the Bank’s

expected range. New NPL from SME declined in

absolute term qoq.

%New NPL

0.49% 0.41% 0.44% 0.49% 0.48% 2.83% 2.77% 2.81% 2.80% 2.85%

Asset Quality

New NPL Formation(Baht billion)

NPLs(Baht billion)


4Q17 1Q18 2Q18 3Q18 4Q18

65.6 65.8 67.4 69.8 70.4

51.7 48.6 53.4 50.4 54.0

35.7 34.7 33.4 33.9 33.5

- NPL 8.6 7.8 7.3 7.1 10.3

- PL 27.1 26.9 26.1 26.7 23.2

Non-

Performing

Loans

Special

Mention

Troubled

Debt

Restructuring

4Q17 1Q18 2Q18 3Q18 4Q18

NPL% 2.83% 2.77% 2.81% 2.80% 2.85%

New NPL% 0.49% 0.41% 0.44% 0.49% 0.48%

NPL% 1.80% 1.77% 1.70% 1.90% 2.16%

New NPL% 0.09% 0.06% 0.02% 0.25% 0.14%

NPL% 8.08% 8.24% 8.25% 8.51% 7.97%

New NPL% 0.67% 0.79% 0.68% 0.73% 0.68%

NPL% 3.08% 3.01% 3.21% 3.17% 3.13%

New NPL% 0.96% 0.70% 0.93% 0.81% 0.85%

NPL% 1.82% 1.69% 1.67% 1.71% 1.80%

New NPL% 0.54% 0.43% 0.51% 0.57% 0.67%

Total

Loans

Auto

Loans

Corporate *

SME *

Housing

Loans

(Baht billion)

New NPL formation trended up slightly but remained within the expected range

The increase in NPLs and special mention loans mostly came from qualitative

classification.

In 4Q18, overall new NPL ratio slightly declined qoq after qualitative

classification of one corporate customer in the mining industry in 3Q18 (for

which full provisions have been made).

* In 2Q18, some SME customers experienced sales turnover growth and were reclassified as Corporate customers. Data as of 4Q17 and 1Q18 are restated figures.

Green / Red fonts indicate decrease / increase in new NPL formation as a % to total loans from the previous period.

Asset Quality

(TDR)

Loans


Non-Interest Income(Baht billion)

43.9 41.9

-13.1% qoq -15.8% yoy

2017 2018 4Q17 3Q18 4Q18

32.2% 30.3% 31.0% 29.8% 26.6%

24.4% 21.1% 23.2% 18.7% 19.0%

+81.9% yoy

-16.6% yoy

+12.1% yoy

-4.7% yoy

2.9 0.7 -0.0 -0.0 -0.3

30.3

28.5

8.0 6.5 6.7

7.1

7.9

1.8 2.2 1.5

10.7 10.3 9.0

+12.1% yoy

-6.2% yoy

-8.5% yoy

+81.9% yoy

-76.2% yoy

-4.7% yoy

Net Insurance Premium

Net Fee Income

Net Gain on Trading

Other Income1/

Net Gain on Investments

%Non-NII to Total Income

%Net Fee and Net Insurance

Premium to Total Income

-33.6% qoq -17.6%yoy

+2.6% qoq -16.4% yoy

Non-NII declined from lower net insurance premium and lower net fee income

2018 non-NII decreased by 4.7% yoy due to lower net insurance premium as new sales in 2018 was not able to offset surrenders and matured policies in prior years. In

addition, net fee income took a hit from digital transaction fee waiver which put pressure on non-NII. However, net gain on investments and net gain on trading rose

significantly yoy.

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

Non-NII


Net insurance premium fell in 2018 because of lower new sales in 2018, a decline in renewal premium following slow insurance sales in the past few years, and higher surrenders given a weak economy and maturation of policies sold in prior years

(Baht billion)

Net Insurance Premium

5.7

2.9 0.7

2016 2017 2018

-65%

Net Insurance Claims

46.6 46.4

49.9

2016 2017 2018

+3%

Net Earned Insurance Premiums

52.3

49.2 50.6

2016 2017 2018

-2%

7.8 4.5 4.9

First Year Premium (of SCB Life)

Life Insurance

CAGR CAGR CAGR


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.

In 2018, net fee income decreased by 6.2% yoy because of digital transaction fee waiver and lower mutual fund fees. Net fee income in 4Q18 increased by 2.6% qoq

which came from corporate finance fees

Net Fee Income by Product

(Baht billion)

30.3 28.5 8.0 6.5 6.7 +2.6% qoq -16.4% yoy

+12.1% qoq -45.6% yoy

+4.0% qoq -18.6% yoy

-1.0% qoq -11.1% yoy

+11.4% qoq -7.4% yoy

+2.3% qoq +4.1% yoy

2017 2018 4Q17 3Q18 4Q18

Net Fee Income Breakdown by Segment

Corporate 23% 25% 23% 23% 24%

SME 8% 7% 7% 8% 7%

Retail 69% 68% 70% 69% 69%

-6.2% yoy

-28.3% yoy

-4.9% yoy

-10.1% yoy

-3.3% yoy

+2.5% yoy26% 28% 25% 32% 32%

17% 18%16%

16% 18%8%

10%9%

10% 9%

23%22%

22%22% 20%

10%10%

10%10% 10%

16% 12% 17%10% 11%

+12.7% yoy

Others 1/

Loan related fee

Mutual fund

Bancassurance fee

GMTS 2/

Bank cards

-6.7% qoq -24.3% yoy

Elimination of digital transaction fees led to a decline in fee income

Fee Income


Fee income fell 6.2% yoy as transactional fees took a hit from digital transaction feewaiver and fees from wealth business declined amid a volatile market

9.5 10.4

2017 2018

+9%

7.9 7.2

2017 2018

-8%

11.7

10.0

2017 2018

-14%

(Baht billion)

Recurring

Fee Income

1/ Transactional fee income includes fund transfer, remittance, payment, cash management, etc.2/ Lending related income includes loan related fee and fee from credit card business 3/ Wealth fee income includes fund management fee, securities business fee and bancassurance fee (from third party insurers)

Transactional Fee Income 1/ Lending Related Income2/ Wealth Fee Income3/

Recurring Fee Income by Business Area


OPEX rose 12.1% yoy primarily from new technology investments and customer acquisition initiatives under the Transformation Program. Cost-to-income ratio went up to

46.8% in 2018. However, on a quarter-on-quarter basis, operating expenses decreased by 2.3% qoq mainly due to lower marketing expenses.

Operating expenses remain high from the Transformation Program

Cost-to-Income Ratio

Operating Expenses(Baht billion)

+12.1% yoy

+4.7% yoy

-2.3% qoq

2017 2018 4Q17 1Q18 2Q18 3Q18 4Q18

57.7

64.6

15.4 16.2 15.8 16.5 16.1

42.3%

46.8%44.9% 45.9% 45.9%

47.5% 47.7%

OPEX


20%

25%

30%

35%

40%

45%

50%

2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E

C/I – Change the Bank

C/I – Run the Bank

Cost-to-income ratio (C/I)

Percentage

Estimate (E)

Pre-transformation

Avg. ~38% CAPEX depreciation and

expense from THB 40 Bn

Transformation program

Change-the-bank cost is

estimated to increase C/I

by around 4-5% in 2019

As investment reaches a plateau in 2019 and benefits from the Transformation Program roll in, we expect the cost-to-income ratio to improve over time

Cost to income


Coverage ratio rose in 2018 following prudential provisions in 4Q18 to safeguard against external uncertainties and at the same time the Bank is shifting its loan portfolio towards unsecured products and digital lending

7.5

5.0 5.0 5.1

8.9

4Q17 1Q18 2Q18 3Q18 4Q18

Provisions(Baht billion)

137.3%141.9% 143.5% 142.5%

146.7%

149 98 96 98 167Credit Cost(bps)

NPL Coverage

Ratio

+18.4% yoy

+72.8% qoq

25.1 24.0

2017 2018

137.3%

146.7%

-4.2% yoy

126 115

Coverage


97.2%

98.6%98.0%

99.1% 99.1%

4Q17 1Q18 2Q18 3Q18 4Q18

26.9% 25.8% 24.9% 25.4% 25.0%

4Q17 1Q18 2Q18 3Q18 4Q18

Both L/D ratio and liquidity ratio remained stable

As loan growth of 5.2% yoy surpassed deposit growth of 3.2% yoy, loan-to-

deposit ratio (L/D) rose to 99.1% in 2018 from 97.2% in 2017. On a qoq basis,

L/D ratio remained stable at 99.1%.

The Bank currently maintains a daily liquidity ratio of 20% or higher as measured

by total liquid assets (at a bank-only level) to total deposits. If the ratio falls below

20%, corrective action will be immediately considered.

Liquid assets primarily comprise cash, net interbank, bilateral repo with the Bank of Thailand and investment in government securities.

Loan-to-Deposit (L/D) Ratio(Consolidated)

Liquidity Ratio(Bank-only)

Liquidity


Capital Adequacy Ratio (CAR) (Basel III)

Strong capital position, currently well above the minimum regulatory requirement, together with adequate loan loss provisions will enable the Bank to withstand any

adverse shocks and to pursue any future growth opportunities.

Capital position remained strong to prepare for future growth opportunities and regulatory changes

2018 Regulatory Minimum

CAR 10.375%

Tier 1 7.875%

Consolidated

CAR 17.7% 17.1% 17.1% 17.6% 17.1%

Tier 2

CET1/ Tier 1

4Q17 1Q18 2Q18 3Q18 4Q18

Bank-only

CAR 17.2% 16.8% 16.6% 17.1% 16.6%

CET1/ Tier 1 15.1% 14.7% 14.5% 15.0% 14.6%

15.6% 15.1% 15.1% 15.6% 15.1%

2.1% 2.0% 2.0% 2.0% 2.0%

Capital

Common Equity Tier 1 (CET1)


PageAgenda



2019 Targets 394.



We have embarked on the transformation journey since mid-2016 to strengthen and position ourselves to win in the new paradigm

Business

intelligence

PromptPayNew EASY

platform

Individual

onboarding

Juristic

onboarding

RPA

SCB ONE SCB

Connect

Office 365

New

format

Cloud

SCB

Academy

Sales vs.

service

Digital platform

Coverage

Digitization

Analytics

Technology

People

Creating and connecting ‘dots’ to build new foundations and capabilities

“Going upside down”

Realizing value from Transformation Program

Mid 2016 2017 20192018 2020

Today

Transforming business model and organization

▪ Lean the bank

▪ Digital acquisition

▪ Data capabilities

▪ New growth (digital lending,

wealth management)

▪ Bank as a Platform

“Going Upside Down”

To be the

‘Most Admired

Bank’

Fixing & building foundation

Realizing value from Transformation Program

Distinctive customer value

propositions + engagement

▪ Revenue enhancement

▪ Cost reduction


Significant progress on the transformation journeyI. ‘Fixing the fundamentals’ II. ‘Going upside down’

2016 2017 2018 2019

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Digital

Platforms

Retail digital platform

Corporate digital platform

Digitization

Onboarding journeys

Advisory journeys

Lending journeys

Payments

Ecosystem plays

Coverage

Network restructuring and migration

SCB Express

Investment / Business Center

AnalyticsData lake

Adobe digital marketing engine

Technology

foundation

Cloud migration

Technology uplift

System upgrades

PeopleSCB Academy

Innovation

push

Blockchain

Marketplace lending

Chatbots

Individual v1.0

Juristic v1.0

Insurance v1.0

Wealth v1.0

Unsecured v1.0

Individual v2.0

Juristic v2.0 / 3.0

Insurance v2.0

Wealth v2.0

Unsecured v2.0

Network analysis

Closure 1.0

Design

Migration

Closure 2.0

Wave 1

New cash management platform

New Easy platform Continuous releases of new features / upgrades

Data Lake set up

> 20 Machine learning Models (Next best action, churn, ATM optimization, fraud, …)

Move to cloud

Cloud infrastructure and migration

HR

Microservices, scalability, testing, agile, …Wave 1

Finance

BusinessLinX

QR

University ecosystem

RTP, Bill payPromptPay v1.0

Design Launch

Training (101, digital, design thinking, agile project mgmt., data…)

On-going

Wave 2

Payment Hub

Wealth On-going

Unsecured v3.0

Service Journeys

Cash Mgmt. V2.0

Wave 2

Blockchain

Roll-out

Procure v1.0 Procure v2.0

Lending v1.0

Perm Poon Bot

Lending v2.0

Roll-out

Today!Remarks: All projects are included in Transformation Program budget of ~THB 40bn

Digital Learning PlatAcademy set up


We created platform to enhance digital lifestyle experience for retail customers and to support business growth in the digital era for SME customers

Retail customer SME customer

SCB SME – Supporting SME customers to grow and expand business in the digital era

SCB EASY – Platform to deliver new digital experiences to retail customers

E-KYC for account opening

Transaction banking

Travel insurance

Loans and credit cards

InvestmentGifts

My deals

MovieExchange rate /

Remittance

CHATBOT

Donation

SCB EASY


Juristic account opening

Examples of new digital experience that have been created from our new capabilities

Digital platform for corporate account

opening and banking service applications

featuring state-of-the-art electronic know-

your-customer (KYC) and authentication

innovation (e-KYC & e-Signature) tools

Personal loan/ credit card application

Thailand’s first e-marketplace end-

to-end digital lending platform for

SMEs using AI and machine

learning technology developed by

SCB ABACUS

Loan approval time

SCB EASY StartBizMae ManeeSri Online

53-7 minsdays 3015-30 minsdays 153-7 minsdays

Digital platform that accommodates

customers’ digital lifestyles based on the

“Moment Banking” concept, i.e. financial

services that fulfill customer needs in

every moment


c

c c

ccc

We have significantly expanded our digital customer base while started to develop strategic partnerships and build ecosystem in response to changes in the digital age

(29% Market share1/)

4.8mn

ID and Mobile

3.6x

2.5 mn

~9 mn

Universities Retailers

Supply chain network (Blockchain solution P2P)

Healthcare

2Q’16 Dec’18 3Q’17 Dec’18

4,000

325x

Mobile

Partnerships in developing ecosystem

15% 13% 9% 6% 6%

62%55%

49%41% 39%

23%32%

42%53% 55%

Jun'17 Dec'17 Jun'18 Sep'18 Dec'18

SCB’s transaction volume mix (Monthly)

Digital

Machine

(ATM/ CDM)

Branch

Financial transactions through digital channel outpacing

the market

>60% active

Tech firms

%Market share

13% 15% 21% n/a

79

12

Jan’17 Aug’17 Mar’18 Dec’18

SCB EASYlaunch

SCB EASY Freenomenon

(As of Dec’18)

(million transactions)

9069 143109No. of financial transactions

(million transactions)127

8.3mn

1/ All commercial banks and SFIs banks

(18% Market share1/)

23%

Jun’18

~1.3 mn


PageAgenda



2019 Targets 394.



1. %YOY except for policy rate (% per annum) and exchange rate (THB/USD)

2. Includes bonds, insurance, mutual funds, private funds, pension funds, and retirement funds

Source: SCB Economic Intelligence Center

Key driver estimates (%)1

GDP growth

Policy rate (end period)

Export USD growth

THB/USD (end period)

Loan growth (sector-wide)

2017A

3.9

9.9

1.50

32.6

Non-deposit wealth2

Deposit+BE (sector-wide)

9.3

4.4

4.7

2018E

4.2

7.0

1.75

32.3

5-7

7.0

5.0

2019F

3.8

3.4

2.00

31.5-32.5

8-10

5-6

5-6

The Thai economy is expected to grow further in 2019 fueled by domestic demand while external demand, fraught by global economic slowdown and risk from US-China trade war, will likely grow at a slower pace


▪ Global and domestic macro-economic headwinds still prevail

▪ Constant disruption is the new normal

▪ Digital is a ‘winners-take-all’ environment

▪ Shifts in banking industry battlegrounds and revenue pools are happening

▪ Cybersecurity and data privacy are becoming minimum table stakes

1

2

3

4

5

Banking industry landscape outlook


Timeline

▪ Customer base foundation

▪ Digital experience foundation

▪ Partnership foundation

▪ Omni-channel foundation

▪ Organization foundation and new culture

▪ Realizing value from ‘SCB Transformation’ program and ‘Going Upside Down’

strategy by connecting new capabilities and leveraging strategic partnership to

enhance customers’ digital experience and deliver new customer value proposition

▪ Investing for the future by leveraging digital technology to create strategic

products under disruptive business model and culture to drive exponential growth

Two-tracked operating model:New Foundations and Capabilities

2019 - 20212018

Core business – consistent profitable growth

Disruptive business model & Exponential growth

1

2

3-year strategic direction: Realizing value from new transformation capabilities, while continuously driving innovation and disruptive capabilities for sustainable growth

(Large SCB EASY and QR merchant base)

(e.g., onboarding, Business Anywhere, Wealth

platform, Digital lending)

(Physical, digital, call center)


(A) Payment / Transaction banking

(B) Lending (C) Wealth management

Realize value from investment made during the past years to deliver new customer experience which will ultimately open up new growth opportunity & lower cost base

1

‘Growth-by-design’ loan portfolio

optimization to improve overall risk-return

▪ Ultra HNW segment: Deliver global

wealth management capabilities thru

SCB and Julius Baer (the leading

Swiss private banking group)

strategic partnership

▪ Private and affluent segment:

Leverage digital technology, robo-

enabled offerings to deliver seamless

and personalized experience

▪ Lower fee income from

digital fee waiver strategy

▪ Payment being

commoditized in exchange

for customer engagement

and data insights

▪ Capture unsecured lending (both

personal and small business lending)

thru new digital and data capabilities

▪ Rebalance loan from corporate/

mortgage to improve efficiency and

reduce concentration

Leverage technology

to lower cost to serve

while efficiently

manage cost of fund

Ensure prudent risk

management e.g., credit,

operational, cyber security risk

Apply advanced technologies

e.g., AI, machine learning,

chatbot to enhance customer

digital experience


Unsecured lending: Capture unsecured lending (both personal and small business lending) through new digital and data capabilities

▪ Scale business through partner

channel to reach out and serve

customers based on their intents

▪ Determine additional strategic

partners to create and deliver new

customer value propositions

Build digital lending

infrastructure

Scale business through

strategic partnership

Create platform to engage and

delight customer

▪ End-to end straight through

processes from acquiring,

onboarding, underwriting and

disbursement

▪ Personalized offer based on

customer needs and credit

worthiness

▪ Create platform to engage

customers before/ after their

“loan experience”

▪ Provide digital solution and

delight customers along the

journey while capturing relevant

data for alternative underwriting

1B

Digital / Technology

PlatformData Analytics Artificial Intelligence

New Culture & Work

Environment

KEY ENABLER


Coverage

Solution Platform & experience

People capabilitySegment-based strategies

Best onshore advisory

iOnboard wPlan iPlan

One wealth

digital

onboarding

Wealth

planning

Protection

planning

Assets management

Insurance partners

Build advisory

capability thru

SCB Wealth

Academy

Equip

advisors with

complete

financial tools

Human

touch

Digital

channel

Customer experience

New business/

operating model

Strategic partnership for

offshore investment

First

Prime

Private

banking

Digital platform with seamless

& smart wealth management

experience

Fully open architecture

Capable financial advisor Mobile RM/ Investment

center/ Wealth branch

Wealth management business: Design segment-based strategy to comprehensively manage customer wealth with seamless and personalized wealth experience

1C

Transformation

Prime

(2-10 MB)

First

(10-50 MB)

UHNW(> 1,000 MB)

Private banking

(50-1,000 MB)


Note: Company logos shown are selected existing partners

E-commerce

Tech &

Digital Services

Wealth & Insurance

University

Travel

Retail

Food & Restaurant

Lifestyle

Supply Chain & LogisticsEnergy

Living

Health &

wellness

1Continue enhancing capabilities and competitiveness thru strategic partnerships to build ecosystem and platform to create and deliver new customer value proposition

Proactively identify new strategic partners to acquire large customer base, gain customer data/ insights,

and ultimately capture main-operating-account customers

2019 Target on Building Digital ecosystem

Digital users (SCB EASY):

> 12 mn digital users

Ecosystem building:

Build “Lifestyle ecosystem"

focusing on lifestyle, travel,

retail, health

Build “Digital commerce

ecosystem” to support

business owners to grow

their business in digital era

Retail

S/SME


Experiment and scale up innovative business models through disruptive digital capabilities/ platforms to drive exponential growth

SCB10X is a newly set up unit with

disruptive business model to experiment

and innovate strategic products. 10X is

operated in a start-up culture and aims to

build new advanced capabilities and

future bank

2

▪ Recent product launched:

Blockchain Procure-to-Pay

solution on R3 Corda

▪ Total fund size of $150mn

- Fintech $100mn

- China tech fund $50mn

Keb Hom

Puek Hom

SCB Abacus is the first advanced data

analytics spin-off in the Thai financial

industry to apply AI and Big Data

technologies to drive purposeful

partnerships, create business value,

and empower people

Mae Manee

Sri Online

Digital Ventures is the fintech subsidiary of

SCB to invest in, experiment with, and

integrate technological innovations for SCB

Fintech subsidiary Analytics subsidiaryNewly setup disruptive unit

within SCB

SCB 10X

Personal Loan |

Apply Now for

Quick

Approval... -

SCB

Personal Loan

“Your loan”

สนิเชื่อ ปรบัได้ ตามใจคุณPerm Poon


PageAgenda



2019 Targets 394.



2017

Actual2018

Actual2019

Targets

Total loan growth (yoy) 4.9% 5.2% 5-7%

Net interest margin 3.23% 3.21% 3.2-3.35%

Non-NII growth -2.2% -4.7% Up to 5%

Cost/Income ratio 42.3% 46.8% Mid 40s%

NPLs (gross) 2.83% 2.85% ≤ 3.0%

Coverage ratio 137.3% 146.7% ≥130%

Credit cost (bps) 126 115 115-135

INCOME/COST

LOANS/NIM

ASSETQUALITY

2019 Targets

IMPORTANT DISCLAIMER:

The above financial targets are based on the Bank’s preliminary estimates that may change due to the economic conditions and other unforeseen circumstances that may affect the operational environment.These targets and other related details will be available on the Bank’s website, www.scb.co.th (Investor Relations > Financial Information > Set Filings).


APPENDIX : SCB’s key recent major awards and recognitions


SCB’s recent major awards and recognitions

The Asset Triple A Digital

Awards 2017

• Digital Bank of the Year

• Best Retail Mobile Banking Experience

• Most Innovative Mobile Banking Application

“SCB EASY”

• Most Innovative ATM Project “Cardless ATM”

Finance Asia’s Country

Awards 2018

• Best Bank in Thailand

• Best Investment Bank in Thailand

• Best Private Bank in Thailand

• Best Belt and Road Bank

• Best Financier of the year

• Best Public Company – Financial Industry

• Best Service Provider – Personal Loan

• Best Service Provider – Credit Card

• Best Mutual Fund of the Year (LTF)

Money & Banking Awards

2017-2018

• Service Innovation of the year

• Branch Innovation of the year

Asian Banking & Finance

Retail Banking Award 2018

Prime Minister’s Digital Award 2018

• Digital Organization of the year

Corporate Governance Asia's 8th

Asian Excellence Award 2018

• Asia’s Best CEO – Mr. Arthid Nanthawithaya

• Asia’s Best CFO – Mrs. Kittiya Todhanakasem

• Best Investor Relations Company (Thailand)

• Best Private Bank in Thailand

• Innovator Awards 2018

• Best Consumer Digital Bank (Thailand)

• Best in Social Media Marketing & Services

Global Finance Magazine

• Best Digital Bank

• Best Corporate and Investment Bank

Asia Money Banking Award 2018

Alpha SEA Annual Best Financial

Institution Awards 2018

• Best Bank 2018

Financial Insights Innovation

Awards 2018

• Asia’s Most Transformative Bank

Bangkok International Digital

Content Festival 2018

• Best Character for Commercial

Use Award (Mae Manee)


SCB has been selected as a member of DJSI World and DJSI Emerging Markets Indices in 2018 scoring top-six among global banks

DJSI World

Index

DJSI Emerging

Markets Index

(Among all 27

banks from 201

invited banks)

(Among all 15

banks from 106

invited banks)

RobecoSAM Industry:

9 Thai companies listed on DJSI World Index

of global banksindustry ranking#6

SCB’s score

The Dow Jones Sustainability Indices (DJSI), created jointly by S&P

Dow Jones Indices and RobecoSAM, evaluate the sustainability

performance of global corporations across sectors

Assessment criteria focus on long-term economic, social and environmental asset management plan.

Evaluations are performed in parallel with analysis of financial performance.

Company:

Banks

Oil & Gas Upstream & Integrated

Food & Staples Retailing

Food, Beverage & Tobacco

Chemicals

Real estate

Siam Commercial Bank

Kasikornbank

PTT

PTT Exploration & Production

Thai Oil

CP ALL

Thai Beverage

PTT Global Chemical

Siam Cement

Central Pattana

In 2018, SCB has been

selected as a member of

1

2

3

4

5

6

Bancolumbia SA Columbia

KB Financial Group Inc Korea

Banco Santander SA Spain

ABN AMBRO Group NV Netherlands

First Financial Holding Co Ltd Taiwan

Siam Commercial Bank PCL Thailand

Bank name:Rank: Country:

Banks

Oil & Gas Upstream & Integrated

Oil & Gas Refining & Marketing

Construction Materials


SCB wins international recognition with 6 innovation awards, highlighting the success of tech innovation in providing services for corporate clients

Reduced to ID Card

NO DOCUMENTS ANYTIME ANYWHERE ONCE AND DONE

กรุณาวางเอกสารภายในกรอบทีก่ าหนด

StartBiz – The new innovative juristic onboarding

15 Physical Documents

▪ Setup profile

▪ Business alert

▪ Local collect

▪ Own account transfer

▪ 3rd party transfer

▪ iCheque book

▪ ORFT

▪ Payroll direct credit

▪ Smart payroll

▪ Direct credit

▪ BahtNet

▪ PromptPay

▪ OR and IR

▪ EDC

▪ Fully digital and audit trail process with

one digital signatory on iPad

▪ No Branch Visit Required

▪ Integration to link business

customer’s data from Ministry of

Commerce directly

“StartBiz” is a digital platform featuring state-of-the-art electronic know-your-customer (KYC) and authentication innovation (e-

KYC & e-Signature) tools. It streamlines back-office processes and operations to provide corporate clients with better customer

experiences

▪ Branch innovation of the Year – Silver

▪ Service innovation of the year -Thailand

▪ The Best branch digitization initiative – Thailand

▪ The Best API initiative

▪ The Best customer service provider, Asia

Awards & recognitions

Asian Banking & Finance

The Asian Banker

The International Banker

Global Finance Magazine

▪ Global financial innovators -Digital Business Account Opening

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