Siam Commercial Bank Plc, one of Southeast Asia’s largest lenders, has fallen out of favour with securities analysts after reporting fourth-quarter results that raised concerns about loan quality.
Nearly a third of the analysts who cover the Thai bank cut their recommendations the past week, helping erase nearly $2 billion from its market value.
Among the 18 lenders in Bloomberg’s Asean Banks Valuation Peers gauge, SCB’s consensus analysts’ rating has tumbled to 3.4 out of a maximum 5 points, the worst after Malaysia’s Public Bank Bhd.
As recently as last Friday, the consensus on SCB was 4.2, which ranked seventh, based on 29 ratings. Each “buy” recommendation counts as 5 points, with 3 points for “hold” and 1 point on “sell.”
SCB and other Thai lenders have closed branches while increasing digital banking in an effort to boost earnings. But a struggling economy has increased bad loans at the bank.
“Thailand’s economy in 2020 is still surrounded by negative factors,” said Therdsak Thaveeteeratham, an analyst at Asia Plus Securities. “Asset quality is still at risk and needs to be watched closely.”
SCB’s shares posted their biggest one-day decline since 2008 on Monday, the first trading day after the fourth-quarter earnings report showed a jump in bad-loan provisions. Asia Plus, Credit Suisse Group AG and JPMorgan Chase & Co were among the brokerages that cut ratings.
Still, the downgrades and reaction may be overdone as SCB raised loan-loss provisions in 2019, said Diksha Gera, a Bloomberg Intelligence analyst. The bank may consider boosting the net interest margin and cut costs to counter weak revenue, she said.
“This should put the bank in good stead for 2020,” said Gera. “The bigger risk we see is potential M&A” following recent moves of other local competitors such as Bangkok Bank Pcl to make acquisitions, she said.
Bangkok Bank Plc last month announced that it would acquire a controlling stake in Indonesia’s PT Bank Permata for about $2.7 billion to expand its presence in Southeast Asia’s biggest economy.