The restructuring of Siam Commercial Bank (SCB) may heighten competition in the lending businesses and cause competitors to expand at a lower rate than expected, said analysts from KTBST Securities.
SCB announced the establishment of five new companies and transition of its existing businesses to be under SCB X Plc, a new holding company, last week with an aim to become a regional fintech conglomerate by 2025.
According to KTBST, the revamp will allow SCB to step up as one of the major players in the lending industry and intensify competition among lenders.
The lending subsidiary companies under SCB X will have access to cheaper loans from SCB while other companies in the industry will have to bear the high cost of raising funds through various instruments such as debentures.
"We view the restructuring will be a negative factor for the existing lenders including providers of personal loans, leasing and hire purchase financing services, as it will indirectly affect their businesses and may lead to lower-than-expected loan growth," KTBST stated.
SCB X's soon-to-be lending subsidiary companies have grown exponentially over the past few years, driven by faster operations after they were separated from SCB which faces tighter regulations from the Bank of Thailand.
After all subsidiaries have moved under SCB X, these companies will have more borrowing capacity to expand businesses that will allow them to lend more with competitive interest rates.
They will also receive data support and in-depth analysis from Data X, one of SCB X's new growth businesses, that is aimed to help improve operational efficiency among subsidiaries.
With end-to-end support and the synergy in place, KTBST said SCB X's subsidiaries will have higher flexibility and potential for growth and disrupt the operations of other firms in the same business.
Card X, a new subsidiary separated from the bank that will specifically oversee credit card and personal loan services, will affect Aeon Thana Sinsap (AEONTS) and Krungthai Card Plc (KTC).
Auto X, a subsidiary focusing on lending for motorcycles and cars that SCB has expertise in, will affect Muangthai Capital (MTC), Amanah Leasing (AMANAH), Ngern Tid Lor (TIDLOR) and Srisawad Corporation (SAWAD).
Alpha X, which has been established as a joint venture with Millennium Group Corporation for leasing loans for supercar and big bikes, will affect Ratchthani Leasing (THANI).
In the short term, KTBST said that every 1% decrease in affected loans will affect net profits of AEONTS, MTC, AMANAH, TIDLOR, KTC, SAWAD and THANI in 2022.
In the long term, KTBST still needs to monitor how Card X, Auto X and Alpha X will perform and how they may affect the operations of other businesses in the financing industry in terms of borrowing costs, price competition policies and customer acquisition channels.
KTBST has a neutral outlook for investment in financial stocks as the 2021 performance is still under pressure from low loan yields.