Net interest income increased 4% yoy to Baht 25.8 billion, reflecting the Bank’s strategy to rebalance its loan portfolio toward higher-margin business, improved funding cost, and higher income recognition mainly from residential mortgagesfollowing the implementation of Thailand’s new accounting standard at the beginning of this year. Nevertheless, net interest income has been under pressure from a lower interest rate environment, contraction in total loan growth, and a drop of NII contribution after divestment of SCB Life.
Non-interest income increased 20% yoy to Baht 11.9 billion, largely from higher recurring fee-based income. In the first quarter, wealth management fees grew 31% yoy to Baht 2.0 billon and income from bancassurance businesses increased fivefold from the same period last year to Baht 3.2 billion which was mainly driven by the new bancassurance partnership with FWD Group. These factors combined outweighed the impact of revised regulatory guidelines on fee structure introduced at the beginning of the year and reduced transaction banking activity during COVID-19 outbreak.
Operating expenses decreased 8% yoy to Baht 16.4 billion due to the absence of one-time personnel expenses recorded in the same period last year and SCB Life’s expenses following the divestment. As a result, cost-to-income ratio for the first quarter improved to 43.6%.
In light of current unfavorable economic conditions, the Bank has set aside provisions of Baht 9.7 billion in the first quarter not onlyto cover new NPL formation but also to comply with the new accounting standard on asset impairment during economic downturn. Non-performing loans stood at 3.17% at the end of March 2020 with adequate NPL coverage at 140%.
SCB’s capital position remains strong with common equity tier 1 (CET1) of 16.1% and a total capital adequacy ratio of 17.2%. However, given the current economic crisis characterized by extreme volatility and uncertainty in both financial markets and real economy with no end in sight, the Board of Directors has decided to cancel the share repurchase program of Baht 16.0 billion approved on March 11, 2020 in order to best help the Bank’s customers get through this unprecedented crisis. The Bank has launched relief programs to help customers as well as participating in public assistance measures announced by the Bank of Thailand. Furthermore, this decision gives the Bank flexibility and readiness to seize potential business opportunities that may arise from the crisis.
Arthid Nanthawithaya, Chairman of the Executive Committee and CEO, stated: “Although the Bank had strong first-quarter performance as a result of enhanced capabilities from the transformation effort, the COVID-19 pandemic is taking a toll on people and the private sector. It also poses significant challenges to the banking sector, both in terms of revenues and asset quality, which will become apparent in subsequent quarters. Despite the current impact on real economy, the Bank’s balance sheet remains strong as evidenced by high capital adequacy ratio at 17.2% and common equity tier 1 (CET1) ratio at 16.1%. These capital buffers and prudent risk management will help the Bank weather the COVID-19 storm and potential economic recession in 2020. Our main focus right now is to support our customers to recover and restore their normal business conditions by offering targeted relief packages and participating fully in public assistance measures announced by regulators. As the COVID-19 crisis rapidly evolves and unfolds, the Bank will monitor the situation closely and will do our utmost to help our customers and broader community in order to get through this challenging time together. Therefore, the Bank deems it necessary to cancel the share repurchase program to allow us to help our customers to the best of our ability.”
