SCB prepares for earnings decline
Digital transformation cutting income flow
Infrastructure investment over the next few years to prepare for digital transformation is expected to continue to deal a blow to Siam Commercial Bank's (SCB) earnings, its chief says.
The bank's 2018 infrastructure investment is expected to be higher than last year's at 4-5 billion baht, said chief executive Arthid Nanthawithaya.
Even though the investment will pressure the bank's earnings over the next few years, SCB would continue to deliver profits, he said.
SCB has set a three-year budget (2016-18) of 30-40 billion baht under its transformation programme, the bulk of which has been used for staff training. The infrastructure investment covers the digital platform, marketing and promotion, and human resource development.
The country's second-largest lender by assets saw its net profit fall by 4.6% from a year earlier to 11.4 billion baht for the January-to-March quarter. The decline in quarterly net profit could largely be attributed to a rise in operating expenses from higher marketing expenses for digital acquisition and higher investment in digital banking to comply with the bank's strategy.
The bank's decision to end fees for digital banking transactions from March 28 has not had a substantial impact on its fee-based income, said Mr Arthid.
Fee-based income contributions from transactional services have declined in line with the rising popularity of online transactions.
SCB needs to carefully balance between income and investment amid the digital transition, he said.
Interbank and cross-clearing-zone money transfers are free for life, as are bill payments, top ups and cardless ATM withdrawals done through its online channel.
The bank's non-interest income for the first quarter jumped by 13.4% year-on-year to 12.0 billion baht mainly because of higher net trading and foreign exchange income, as well as an increase in net fee income from corporate finance fees and bancassurance fees.
"As the bank is moving from traditional banking services to a digital platform, it needs more investment expenditures, especially in platform development and marketing to migrate customers to the digital platform," said Mr Arthid.
The bank will continue to downsize its brick-and-mortar branch network to cut down operating costs as traditional banking transactions have continued to decline in accordance with consumers' changing lifestyles.
SCB plans to shutter 200 branches this year.
In related news, chief marketing officer Thana Thienachariya said the bank plans to cancel bill payment services for others firms at SCB branches in the second half of the year to slim down the bank's operating costs and encourage shifting the service to the digital platform.
SCB estimated its mobile banking app, SCB Easy, saw 7 million users last month, rising 65% from the same period a year before.
SCB shares closed Monday on the Stock Exchange of Thailand at 131 baht, down two baht, in trade worth 829 million baht.