Siam Commercial Bank pops the champagne on impressive 2Q14 earnings

Thanks partly to unexpectedly lower credit costs.

Thailand-based Siam Commercial Bank's net interest income grew by 5 percent QoQ in 2Q14, although loan growth was flat QoQ and YTD.

According to a research note from Maybank Kim Eng, the bank's NIM also improved significantly to 3.34 percent thanks to lower funding costs.

Non-interest income (Non-NII) grew 14 percent QoQ as the bank booked a THB1.3b after tax gain from sales of SCSMG.

The report said that excluding these extra items, Non-NII increased 4 percent QoQ due to the higher net trading income.

Here's more from Maybank Kim Eng:

Cost to income ratio decreased QoQ to 35%. PPoP is in line with our forecast of THB22b.

NPLs stay at manageable level. SCB set aside THB3.2b provision expenses or 78bps of loan in 2Q14. NPLs increased 4% QoQ while NPL ratio moved up 10bps QoQ to 2.4% with a lower NPL coverage ratio of 141%.

We cut OPEX growth to 7% from 11% and assume 0.78% credit cost from 0.80% previously to reflect the better than expected cost controls in 1H14.

We keep a 6% loan growth target this year as we expect loan demand to recover in 2H14.

After fine-tuning assumptions, we expect earnings to grow 8% this year. Key upside risk is strong loan and fee income growth from corporate segment. Downside risk is the asset quality deteriorated