Siam Commercial Bank (SCB), the banking business unit under SCB X Plc, expects no growth in small and medium-sized enterprise (SME) and retail loans this year, citing the fragile financial conditions of these two customer segments.
For overall loan expansion in 2024, SCB is targeting a flat to marginal growth rate of around 1-2%.
The modest target is based on the stagnant growth of SME and retail loans, attributed to the sluggish economic rebound, swelling household debt and weak income recovery among lower-income earners, putting pressure on the debt repayment ability of individual and SME clients.
The bank plans to sharpen its focus on asset quality, particularly when dealing with selective customers seeking new loans in these business segments, said SCB chief executive Kris Chantanotoke.
SCB, the country's fourth-largest lender by total assets, expects to emphasise corporate loan growth this year, capitalising on the solid financial conditions of large corporates, he said.
However, the bank expects heightened competition in the low-risk business segment from large banks this year, said Mr Kris.
SCB X reported year-on-year total loan growth of 2.08% in 2023.
Under SCB Group's business strategy, SCB concentrates on segments with acceptable margins and relatively low risks, while SCB X prioritises high-risk, high-return segments.
In light of these challenges, he said non-interest income, particularly from wealth management and digital banking services, would be a key contributor to the bank's revenue.
SCB aims to increase the proportion of revenue from digital channels to 25% of total earnings by 2025.
"Digital revenue grew to 7% of the total last year and the bank is optimistic about reaching its target of 13% this year," said Mr Kris.
"Although raising the contribution to 25% next year poses a considerable challenge, the bank is maintaining this ambitious goal."
SCB X is in the process of acquiring 100% of the shares in consumer finance lender Home Credit Vietnam through SCB in a deal valued at 31 billion baht, he said.
The transaction is expected to be completed by the first half of 2025, said Mr Kris.
He said this asset acquisition aligns with SCB X's strategy to become a leading regional financial technology group, citing Vietnam's robust GDP growth of 7-8% a year and a large population of around 100 million that is young and familiar with digital technology as key factors for expanding SCB's presence in the neighbouring country.
With a customer base of 15 million and 14,000 touchpoints across Vietnam, Home Credit also provides SCB with significant opportunities to expand its business in the regional market, said Mr Kris. SCB already has a presence in Ho Chi Minh City, he said.