Siam Commercial Bank finally back on track after the Sahaviriya Steel Industries saga

Credit cost is expected to have declined 74% in 4Q15.

For 4Q results (tentatively scheduled for 19 Jan), Maybank Kim Eng envisages considerable improvements as it expects a 74% QoQ decline in credit cost after the Sahaviriya Steel Industries (SSI) saga ended. Non-interest income is also likely to weaken from the previous quarter in the absence of extra asset sales.

Here's more from Maybank Kim Eng:

We expect loans to have expanded by 1%, partially driven by government’s soft loans. Net interest margin should have strengthened slightly to 3.1% from the low base last quarter when the bank reversed accrued income for SSI. Thus, we look for net interest income growth of 1% this quarter.

We anticipate a drastic QoQ drop in non-interest income as there were extra asset sales totalling THB7.7b last quarter to offset the jump in provisions stemming from SSI’s reclassification to NPL. Operating expenses are expected to have risen since some annual expenses typically occur at the end of the year. 

After the surge in NPL last quarter from SSI’s bad debts, we anticipate a stabilisation in credit quality in 4Q. Gross NPL may have edged up but thanks to the 1% loan expansion, we think NPLs dipped to 3.40% in 4Q. 

Credit cost is projected to have returned to normal, due to a stabilisation in NPLs, and we look for annualized credit cost of 0.9%. The large decline in provisions should boost net profit to THB11b, up 22% QoQ.