Siam Commercial Bank (SCB) is aiming to become a leading player in the local wealth management space by 2025, as the 115-year-old bank looks to increase revenue from what it believes can be a key growth engine for banks.
Increasing capital requirements and tighter interest rate margins are forcing banks to find new revenue streams such as wealth management, offering a fee-based advisory service to wealthy clients, which is quickly gaining popularity within the industry.
FUTURE POTENTIAL
Chief executive Kris Chantanotoke said he wants to grow SCB's revenue from wealth management practices by 25% within two years, elevating the segment in the market.
The country's fourth-largest lender by total assets also aims to increase the proportion of revenue from digital channels to 25% of total earnings by 2025.
"We want to outperform the market this year and become No.1 in the wealth management industry by 2025," said Mr Kris.
Realising the potential of this segment, the bank is using a three-pronged strategy that includes being customer-centric, having employee unity and engagement, he said.
With the establishment of SCB X, SCB's holding company, the bank can focus on capturing new opportunities and managing the transition to new digital processes and technologies.
Mr Kris said SCB is transforming into a digital bank with a human touch in a drive to bridge the gap between tradition and modernity, as consumers seek a more personalised and streamlined banking experience now.
"We need new delivery models, new offerings, an integrated platform provider and to recast the role of advisors and specialists to serve hybrid engagement models involving digital channels and human interactions," he said.
SCB posted revenue of 110 billion baht in the first nine months of 2023, up from 99 billion year-on-year.
Net profit tallied 36.6 billion baht for the period, a 21% increase.
Mr Kris attributed the performance to effective cost control measures, reducing operational costs to 37.4% this year from 41% last year. Insurance activities, trade finance and capital markets also contributed to the strong rate of growth.
He said the bank also benefited from higher interest rates, which positively influenced the interest rate spread.
IT OVERHAUL
SCB allocated 8 billion baht to overhaul its core banking system for transactions in 2024 through the consolidation of multiple capabilities on a single banking platform.
Orapong Thien-Ngern, president and chief technology officer of SCB, said the bank deployed 764 banking systems on its core banking infrastructure, over 50 of which rely on decades-old infrastructure.
He said banks run on different core banking solutions, leading to siloed operations, inconsistency in the customer experience and risk management pressures.
SCB plans to change its 50 traditional core technologies next year to digital technologies in all areas of its banking operations.
"We aim to reduce our core banking platform to roughly 100 systems as we want to advance towards a fully integrated digital bank for enhanced services," said Mr Orapong.
He said the power of artificial intelligence (AI) and machine learning will play a greater role in enhancing customer service and the customer experience, as well as comprehending individual customer requirements and behaviours.
AI is also expected to help banks reduce costs by automating routine tasks, said Mr Orapong.
SCB has 17 million customers, of which roughly 15 million or 90% use its mobile banking platform across various digital channels, which includes 33 million accounts.
Digital transactions grow by 20-30% annually, he said.
Based on data provided by the Bank of Thailand, Mr Orapong said the number of mobile banking users in Thailand as of the end of July 2023 exceeded 103 million. There have been 2.53 billion digital transactions accounting for a total value of 5.72 trillion baht, according to the central bank.
Transaction volume from mobile banking accounted for 97.3% of total digital banking transactions, with the remainder from internet banking platforms.
"SCB aims to increase the proportion of revenue from digital channels to 25% of total revenue by 2025, up from 7% now, or 36.4 billion baht," he said.
DISRUPTIVE TRENDS
Lalitphat Toranavikrai, chief executive of SCB-Julius Baer Securities Co, said a new generation of investors, shifting demographics, increasing regulatory burdens, new business models and heightened competition would combine to compound the level of disruption in the wealth management industry.
A younger generation of investors are seeking investments that reflect their underlying values, said Ms Lalitphat. Institutions that are unwilling or unable to address client demands for environmental, social and governance-compliant portfolios risk losing those clients to other providers, she said.
A 60:40 joint venture between SCB and Swiss private banker Julius Baer, SCB-Julius Baer Securities aims to establish market power in Thailand's international private banking sector.
Ms Lalitphat said research this year indicates global wealth has declined by 4%, while wealth among affluent individuals in Southeast Asia, specifically Thailand, grew by 4%.
Unlike other countries, 80% of high net worth individuals in Thailand retain their investment portfolios onshore.
In addition, foreign investment has grown every year and more companies are entering the Thai market, she said.
SCB-Julius Baer Securities provides a team of experts and professionals to offer advice across different fields, tailoring solutions to manage wealth while addressing individual needs and preferences, said Ms Lalitphat.
This strategy aims to lure new customers, she said.
SCB's headquarters in Bangkok.
A GAME CHANGER
Innovative wealth management solutions will become a distinguishing factor for the firm's wealth managers, said Yunyong Thaicharoen, chief wealth banking officer at SCB.
Revenue from the wealth management business is expected to grow by more than 20% this year, driven by the extension of insurance coverage, deposits, and property-backed loans and Lombard loans.
SCB has a customer base of 1 million for its wealth management services.
The company has more than 500 relationship managers certified in international financial planning courses.
"We aim to achieve double-digit growth in wealth management over the next 3-5 years, surpassing market growth rates," said Mr Yunyong.
FOUR CHALLENGING FACTORS
Mr Kris said there are four challenges facing banks next year.
First, global interest rates appear to have reached a peak or are on a plateau, ending the hikes that occurred through much of 2023, leading to a decline in the interest rate spread, he said.
Risks are expected to rise, stemming from bad debts within vulnerable customer groups, said Mr Kris.
Third, the pace of technological change is escalating, with new technologies being released more quickly every year, fuelled in part by AI, he said.
Finally, the cost of operations will likely increase, making automation crucial for banks to minimise expenses, said Mr Kris.