1H18/2Q18 Financial Results
Investor Presentation
September 2018
IMPORTANT DISCLAIMER: Information contained in this document has been prepared from several sources and the Bank does not confirm the accuracy and completeness of such data, particularly where the data is sourced from outside the Bank. In addition, any forward looking statements are subject to change as a result of market conditions and the final result may be different to that indicated. The Bank makes no representation or warranty of any type whatsoever on the accuracy or completion of the information contained herein.
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 1 / 43 Agenda Page
1. Review of 1H18/2Q18 Results 3-17
2. Economic Indicators and 19-24 2018 Strategy & Outlook
3. Transformation Update 26-33
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 2 / 43 Moderate performance with higher revenue and strong buffers 1H18 Results
2017 2018 1H18 (Consolidated) Actual Targets Actual 1H18 Highlights 1H18 net profit was Baht ROE 12.4% N.A. 12.3% 22.5 billion, a 5.7% yoy decline largely from higher ROA 1.45% N.A. 1.47% operating expenses during the Bank’s high investment PROFITABILITY cycle, while total revenue Net interest margin 3.23% 3.1-3.3% 3.19% continued to grow.
NIM was at 3.19%, in line Non-NII growth (yoy) -2.2% Up to 5% 3.3% with the annual target of 3.1- 3.3%.
INCOME/ Cost/Income ratio 42.3% 45-47%* 45.9% Non-NII rose by 3.3% yoy COST mainly from higher net trading and FX income, net fee income, and gain on Total loan growth (yoy) 4.9% 6-8% 6.7% investments.
Coverage ratio improved to NPLs (gross) 2.83% ≤3.0% 2.81% 143.5% while NPL ratio LOANS/ ASSET stood at 2.81%. QUALITY Coverage ratio 134.3% ≥130% 143.5%
CAR 17.7% N.A. 17.1%
CAPITAL CET1/ Tier 1 15.6% N.A. 15.1%
* Revised per Board of Directors’ resolution on 19 July 2018. N.A. = Not Available Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 3 / 43 Financial Summary – 1H18/2Q18 Financial Results 1H18 Results
2018 1H18 %YoY 2Q18 %QoQ %YoY Forecast Total income 69.7 3.8% 34.3 -2.9% 1.1%
- NII 47.2 4.0% 23.8 2.2% 4.7% - Non-NII 22.5 3.3% 10.5 -12.9% -6.2%
Operating Expenses 32.0 15.5% 15.8 -2.8% 10.7%
Operating profit 37.7 -4.4% 18.6 -3.1% -5.9%
Provisions 10.0 -0.0% 5.0 -0.1% -0.1%
Net profit 22.5 -5.7% 11.1 -2.2% -6.7%
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 4 / 43 Top-line continued to grow on the back of net interest income growth Total Income
Total operating income for the first half of 2018 grew 3.8% yoy, mainly driven by net interest income growth. On a quarterly basis, total operating income rose 1.1% yoy, supported by net interest income growth despite pressure from lower non-interest income.
Total Operating Income (Baht billion)
+3.8% yoy
69.7 67.2
Non-NII 21.8 22.5 +3.3% yoy +1.1% yoy -2.9% qoq 33.2 34.0 34.7 34.4 35.4 34.3
10.6 11.2 11.4 10.7 12.0 10.5 -12.9% qoq -6.2% yoy 47.2 NII 45.3 +4.0% yoy
22.6 22.8 23.3 23.7 23.3 23.8 +2.2% qoq +4.7% yoy
1H17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 %Non-NII/ total income 32.5% 32.3% 32.0% 32.9% 32.9% 31.0% 34.0% 30.6%
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 5 / 43 Net profit declined as OPEX outweighed revenue growth Profitability
In 1H18, total income grew by 3.8% yoy from both NII and non-NII. However, an increase in OPEX from investments in new technology platforms as part of the Transformation Program and digital acquisition activities led to a 5.7% yoy decline in net profit.
Net Profit and Operating Profit1/ (Baht billion)
Operating 39.4 Profit 37.7 -4.4% yoy
19.7 19.7 20.2 18.9 19.1 18.6 -5.9% yoy -3.1% qoq Net Profit 23.8 22.5 -5.7% yoy 11.9 11.9 11.1 10.1 9.2 11.4 -6.7% yoy -2.2% qoq
1H17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
1/ Net profit before impairment provisions, non-controlling interest, and taxes. Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 6 / 43 Loan growth and effective funding cost management bolstered NII NII
In the first half of 2018, NII increased by 4.0% yoy due mainly to loan growth of 6.7% yoy and better funding cost management. On a quarterly basis, NII growth of 4.7% yoy and 2.2% qoq was driven by loan growth and widened NIM.
5.8% 6.7% 6.2% 5.8% 5.7% 6.7% Loan Growth 4.3% 4.9% (%yoy)
3.28% Net Interest Margin 3.19% 3.19% 3.21% 3.18% 3.23% 3.18% 3.21% (NIM)
Net Interest Income 45.3 47.2 +4.0% yoy (Baht billion) +4.7% yoy +2.2% qoq
22.6 22.8 23.3 23.7 23.3 23.8
1H17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Yield on Earning Assets 4.35% 4.28% 4.39% 4.34% 4.38% 4.39% 4.26% 4.31% Yield on Loans 5.41% 5.21% 5.44% 5.40% 5.43% 5.36% 5.19% 5.25% Cost of Funds 1.46% 1.39% 1.48% 1.46% 1.45% 1.41% 1.39% 1.40% Costs of Deposits 1.40% 1.30% 1.40% 1.41% 1.39% 1.36% 1.31% 1.31% Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 7 / 43 Above sector average loan growth in 2017 with an upward trajectory Credit Cycle
SCB’s Global SCB’s market Thailand’s acquisition of financial crisis; share growth economic SCB Leasing1/ SCB tightened strategies in slowdown and market credit mortgage, auto Loan Growth share gains in underwriting and SME segment (%yoy) SME segment standards
30.0% SCB Loan Growth
20.0% 2018 SCB Loan Growth Target
10.0% 4.9% 6-8% Banking Sector 2/ Loan Growth 5-6% 4.4% 0.0% Estimated Sector Loan Growth by EIC
-10.0%
2011
2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018F
1/ In 2006, the Bank increased its holding in SCB Leasing (then Thai Panich Leasing PCL) from 37.6% to 95.5%. 2/ SCB EIC’s estimation as of July 2018 Source: Bank of Thailand’s website (for sector loans growth) Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 8 / 43 Total loan growth at 6.7% yoy in line with the 2018 target Loan Growth
The yoy loan growth was experienced across all segments, particularly in the corporate and retail segments.
Loans1/ Corporate Loans1/ 3/ SME Loans1/ 3/ (Baht billion) +6.7% yoy (Baht billion) (Baht billion) +1.9% qoq +9.1% yoy +1.8% yoy 2,063 2,103 +3.0% qoq +0.8% qoq 1,994 2,035 1,970 828 783 804 344 759 765 342 342 338 339
2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18 Loans Breakdown1/ as at 30-Jun-18 2Q17 3Q17 4Q17 1Q18 2Q18 Retail Loans1/ (Baht billion)
Corporate Mortgage 930 39.4% Retail 30.3% 873 890 910 918 Retail +6.5% yoy +1.4% qoq (38.5%) 44.2% ( 31.0%) 2/ 90 100 98 102 Others +15.5% yoy +3.6% qoq (44.3%) 88 173 177 180 187 192 Auto +10.8% yoy +2.7% qoq SME Auto 16.4% 9.1% (8.8%) (17.2%) Others 4.8% (4.5%) 612 623 630 632 637 Mortgage +4.1% yoy +0.7% qoq
( ) : Loan breakdown as at 30-Jun-17 1/ Including loans classified as NPLs 2/ Mainly credit cards and unsecured consumer loans 2Q17 3Q17 4Q17 1Q18 2Q18 3/ Some SME customers have experienced sales turnover growth and have been reclassified as Corporate loans. Data for Jun 30, 2017, Dec 31, 2017, and Mar 31, 2018 are restated figures. Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 9 / 43 Coverage ratio continued to rise while NPL slightly increased Asset Quality
NPL ratio stood at 2.81% in 2Q18, down from 2.83% in In 2Q18, loan loss provision was set at Baht 5.0 billion, 4Q17, but rose from 2.77% in 1Q18 mainly driven by higher unchanged qoq and yoy, which was adequate based on NPLs in SME segment and housing loans. Coverage ratio prudential provisions for future uncertainty. continued to rise and stood at 143.5%.
Coverage Ratio Provisions (Baht billion) -0.1% yoy 141.9% 143.5% 136.4% 137.3% -0.1% qoq 133.5% 7.6 7.5 5.0 5.0 5.0
Gross NPL %
2.83% 2.81% 2Q17 3Q17 4Q17 1Q18 2Q18 2.65% 2.75% 2.77% Credit cost 102 152 149 98 96 (bps)
Non-Performing Loans Troubled Debt Restructuring (Baht billion) (Baht billion) -14.8% yoy -3.7% qoq 67.4 +10.2% yoy 65.6 65.8 39.2 62.8 +2.4% qoq 37.0 35.7 34.7 61.2 33.4 11.1 9.0 NPL 8.6 7.8 7.3
28.0 28.0 27.1 26.9 26.1 PL
2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 10 / 43 New NPL formation rose slightly but within expected range Asset Quality
Special mention loans increased by 16.7% yoy and In 2Q18, new NPL ratio stood at 0.44%, up qoq from 9.9% qoq. The qoq increase was due mainly to mortgages for self-employed borrowers and auto loans. qualitative classification to special mention loan of one corporate client in the commercial industry.
Special Mention 2Q17 3Q17 4Q17 1Q18 2Q18 (Baht billion) Total NPL% 2.65% 2.75% 2.83% 2.77% 2.81% +16.7% yoy Loans New NPL% 0.45% 0.38% 0.49% 0.41% 0.44% +9.9% qoq NPL% 2.23% 1.85% 1.80% 1.77% 1.70% 53.4 Corporate * 51.7 New NPL% 0.03% 0.01% 0.09% 0.06% 0.02%
NPL% 7.65% 8.01% 8.08% 8.24% 8.25% 48.9 48.6 SME * New NPL% 1.08% 0.58% 0.67% 0.79% 0.68% 45.8 NPL% 2.33% 2.76% 3.08% 3.01% 3.21% Mortgage New NPL% 0.70% 0.70% 0.96% 0.70% 0.93%
Auto NPL% 1.72% 1.75% 1.82% 1.69% 1.67% 2Q17 3Q17 4Q17 1Q18 2Q18 Loans New NPL% 0.50% 0.50% 0.54% 0.43% 0.51%
* In 2Q18, some SME customers have experienced sales turnover growth and have been reclassified as Corporate customers. Data as of 2Q17, 3Q17, 4Q17, and 1Q18 are restated figures. Green / Red fonts indicate decrease / increase in new NPL formation as a % to total loans from the previous period. Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 11 / 43 Non-NII rose in 1H18 from stronger net trading & FX income, Non-NII higher net fee income and gain on investments
Non-NII increased by 3.3% yoy in 1H18 mainly due to higher net trading & FX income, net fee income and gain on investments. On a quarterly basis, non-NII in 2Q18 declined by 6.2% yoy and 12.9% qoq largely due to lower net fee income from the fee waiver, lower net trading and FX income, and lower net insurance premium.
NonNon--InterestInterest IncomeIncome 21.8 22.5 +3.3% yoy (Baht(Baht billion)billion)
Gain on Investments +114.5% yoy Other Income1/ -16.6% yoy Net Trading and FX Income 3.4 4.3 +24.1% yoy
12.0 11.2 10.5 -12.9% qoq -6.2% yoy Net Fee Income 2.6 14.4 +5.5% yoy 1.8 -34.2% qoq -4.3% yoy 15.2 1.7
7.1 8.1 -13.0% qoq -0.8% yoy 7.1 Net Insurance Premium 2.1 -54.0% yoy -37.3% qoq -60.0% yoy 1.0 0.9 0.6 0.4 1H17 1H18 2Q17 1Q18 2Q18
%Non-NII to Total Income 32.5% 32.3% 32.9% 34.0% 30.6%
%Net Fee and Net Insurance 24.7% 23.3% 23.8% 24.7% 21.7% Premium to Total Income
1/ Other income includes income from equity interest in affiliated companies, dividend income, and other operating income. Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 12 / 43 Despite digital transaction fee waiver, 1H18 net fee income increased Fee Income yoy from rising corporate finance and bancassurance fees
In 1H18, net fee income grew by 5.5% yoy from higher fee income from corporate finance and bancassurance. On a quarterly basis, net fee income in 2Q18 declined by 13.0% qoq largely from the digital transaction fee waiver, lower mutual fund, and loan related fees.
Net fee income Breakdown by Product (Baht billion)
14.4 15.2 +5.5% yoy 7.1 8.1 7.1 -13.0% qoq -0.8% yoy
Others 1/ 15% 13% -7.1% yoy 16% 16% 10% -47.8% qoq -36.9% yoy +0.0% yoy 9% -16.2% qoq -5.9% yoy Loan related fee 10% 10% 10% 10% 22% Mutual fund 24% 22% -1.8% yoy 23% 23% -17.5% qoq -6.5% yoy 11% -0.5% qoq +17.1% yoy 10% Bancassurance fee 8% +22.4% yoy 9% 9% +33.1% yoy 20% +0.6% qoq +29.8% yoy GMTS 2/ 15% 19% 16% 18%
Bank cards 27% 26% 27% 28% +0.5% yoy 24% +1.6% qoq +3.0% yoy
1H17 1H18 2Q17 1Q18 2Q18 Net Fee Income Breakdown by Segment
Corporate 21% 26% 21% 26% 26% SME 8% 7% 8% 7% 8% Retail 71% 67% 71% 68% 67%
1/ Others include brokerage fee, fund transfer, remittance, etc. 2/ GMTS stands for Global Markets and Transaction Services, which includes cash management, trade finance, corporate finance and corporate trust. Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 13 / 43 Strong growth in low cost deposits (CASA) Deposit Growth
Deposit growth of 4.3% yoy mainly from higher savings accounts, raised the Bank’s CASA ratio to 68.1% in 2Q18 from 63.9% in 2Q17.
Deposits (Baht billion) +4.3% yoy +2.5% qoq
2,057 2,027 2,092 2,093 2,146 70 Current +1.9% yoy -3.6% qoq 69 69 78 73
Savings +11.6% yoy +2.9% qoq 1,246 1,241 1,282 1,352 1,391
Fixed -7.7% yoy +2.5% qoq 742 717 732 668 685
2Q17 3Q17 4Q17 1Q18 2Q18
Current & Savings Accounts (CASA)
63.9% 64.6% 65.0% 68.1% 68.1%
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 14 / 43 The Bank’s liquidity position remained strong Liquidity
As loan growth of 6.7% yoy outpaced deposit growth of The Bank currently maintains a daily liquidity ratio of 4.3% yoy, loan-to-deposit ratio rose to 98.0% in 2Q18 20% or higher as measured by total liquid assets (at a from 95.8% in 2Q17. On a qoq basis, L/D ratio declined bank-only level) to total deposits. If the ratio falls below from 98.6% to 98.0%. 20%, corrective action will be immediately considered.
Loan-to-Deposit Ratio Liquidity Ratio (Consolidated, %) (Bank-only, %)
98.4% 98.6% 30.0% 26.9% 25.8% 98.0% 23.9% 24.9% 97.2% 95.8%
2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18
Liquid assets primarily comprise cash, net interbank, bilateral repo with the Bank of Thailand and investment in government securities.
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 15 / 43 Transformation-related investments temporarily raised OPEX the Bank’s cost base
1H18 OPEX increased by 15.5% yoy primarily due to investments in major transformation projects, new technology platform and digital acquisition. Given modest top-line growth in the high investment cycle, cost-to-income ratio went up to 45.9% in 1H18.
Cost-to-Income Ratio (%) 45.9% 44.9% 45.9% 45.9% 41.3% 40.6% 42.0% 41.9%
Operating Expenses (Baht billion) 32.0 +15.5% yoy 27.7 +10.7% yoy -2.8% qoq
15.4 16.2 15.8 13.5 14.3 14.5
1H17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 16 / 43 Capital position remained strong to prepare for future growth Capital opportunities and regulatory changes
Strong capital position, currently well above the minimum regulatory requirement, together with adequate loan loss provisions will enable the Bank to withstand any adverse shocks and to pursue any future growth opportunities.
Capital Adequacy Ratio (Basel III)
Consolidated
CAR 17.4% 18.2% 17.7% 17.1% 17.1%
2.1% Tier 2 2.1% 2.1% 2.0% 2.0%
2018 Regulatory Minimum 16.1% CAR 10.375% CET1/ Tier 1 15.3% 15.6% 15.1% 15.1% Tier 1 7.875%
2Q17 3Q17 4Q17 1Q18 2Q18
Bank-only
CAR 16.8% 17.6% 17.2% 16.8% 16.6% CET1/ Tier 1 14.7% 15.5% 15.1% 14.7% 14.5%
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 17 / 43 Agenda Page
1. Review of 1H18/2Q18 Results 3-17
2. Economic Indicators and 19-24 2018 Strategy & Outlook
3. Transformation Update 26-33
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 18 / 43 Economic recovery continues in the first half of 2018 in a more broad-based manner. GDP growth is expected to accelerate while policy rate remains constant. Key risk to watch is trade tension between the US and China.
Key driver estimates (%)1 2017A 2018F
GDP growth 3.9 4.5
Export USD growth 9.9 8.5
Policy rate (end period) 1.50 1.50
THB/USD (end period) 32.6 32.5-33.5
Loan growth (sector-wide) 4.4 5-6
Deposit+BE (sector-wide) 4.7 5-6
Non-deposit wealth2 9.3 8-10
1. %YOY except for policy rate (% per annum) and exchange rate (THB/USD) 2. Includes bonds, insurance, mutual funds, private funds, pension funds, and retirement funds Source: SCB Economic Intelligence Center Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 19 / 43 Paradigm shifts in banking industry continue to evolve
Digital disruption & Evolving customer behavior the rise of non-banks
Expectation shift towards Hyper competition among faster, simpler, safer banks and non-banks services at lower cost (fintech, telco, Chinese platforms)
Looming regulatory change Product commoditization
(e.g., SME single account, IFRS9, Commoditization of retail transaction banking leading National e-Payment, to structural change in e-Marketplace Platform) pricing/ competition
Rapidly changing environment requires bold strategic moves if banks want to remain relevant in the future
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 20 / 43 The race is on to disrupt traditional banking with new comers from digital startups and tech giants across countries
Every aspect of the traditional banking Digital giants enter the battle field business is under attack by Fintech/startups through new business model – ‘Platform’
Focusing on addressing ‘specific customer ‘Platform’ model focusing on pain point’ with structurally ‘lower cost base’ acquiring customers and gaining and ‘better customer experience’ customer data / insight
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 21 / 43 We have embarked on the transformation journey since mid-2016 to strengthen ourselves and position to win in the new business paradigm
Macroeconomic headwinds To be the ‘Most Admired Bank’ Digital disruption
Consumer behaviors Today
Regulatory Mid 2016 2017 2018 2019 2020 shifts ‘Fixing the A B ‘Going Upside Down’ Fundamentals’
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 22 / 43 A ‘Fixing the Fundamentals’: Over the past years, we have started to build strong foundation and capabilities for the future
Jun 2016 2017 2018 Today
Wealth strategic Sales service partnership separation New EASY Mae Manee Rattanakosin New call application SCB center Digital Ventures Connect
SCB Express Business Investment Freenomenon center center campaign
Tech Data People Process Coverage
▪ Stable/scalable/ ▪ Technical data lake ▪ Systematic way ▪ Standardized ▪ Leading edge reconfigurable ▪ Center of to manage approach for digital platform infrastructure excellence with resource/ talents digitization ▪ New format pilots ▪ Cloud migration data engineers/ ▪ Mindset of speed ▪ Customer expe- ▪ Beyond banking and open API data scientists rience capabilities platform setup
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 23 / 43 B ‘Going upside down’: Organization and business model transformation
1▪ Lean: Lean the bank by leveraging digital technologies to lower cost base and create agility/immunity under the new paradigm
2▪ Digital acquisition: Revolutionize digital acquisition model to upscale digital/ customer base
3▪ Data capabilities: Build data analytics capabilities across organization
4▪ New growth: Capture blue ocean growth in high margin/alternative lending
5▪ Bank as a platform: Explore new business model to become ‘Bank as a platform’ + New Culture
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 24 / 43 Agenda Page
1. Review of 1H18/2Q18 Results 3-17
2. Economic Indicators and 19-24 2018 Strategy & Outlook
3. Transformation Update 26-33
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 25 / 43 SCB’s digital transformation aims to deliver a distinctive customer value proposition
▪ Available across all Streamlined and channels 24/7 ▪ automated processes ▪ Continuous & Anytime, Simple & Intuitive digital consistent ▪ Anywhere seamless interfaces experiences ▪ User-friendly
Personalized & contextualized Engaging
▪ Personalized offerings ▪ Facilitate frequent ▪ Dynamic bundles/ pricing interactions between bank and customer ▪ Profile and situation-specific CUSTOMER ▪ Cross-sell opportunities
Beyond financial needs Delightful
▪ Goal-oriented savings and banking ▪ Instant gratification ▪ Digitally-enabled advisory ▪ Proactive customer support ▪ Enjoyable experiences through gamification
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 26 / 43 Significant progress on the transformation journey
I. ‘Fixing the fundamentals’ II. ‘Going upside down’ 2016 2017 2018 2019 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
Digital Retail digital platform New Easy platform Continuous releases of new features / upgrades Platforms Corporate digital platform New cash management platform Onboarding journeys Juristic v1.0 Juristic v2.0 / 3.0 Individual v1.0 Individual v2.0 Advisory journeys Insurance v1.0 Insurance v2.0 Wealth v1.0 Wealth v2.0 Digitization Lending journeys Unsecured v1.0 Unsecured v2.0 Payments PromptPay v1.0 RTP, Bill pay QR
Ecosystem plays BusinessLinX University ecosystem Network restructuring and Network analysis Migration migration Closure 1.0 Closure 2.0 On-going
Coverage SCB Express Design Wave 1 Wave 2 Investment / Design Launch Business Center Data lake Data Lake set up Move to cloud Analytics Data analytics Next best action, churn, cash, fraud, … Cloud migration Cloud infrastructure and migration Technology uplift Technology Microservices, scalability, testing, agile, … System upgrades HR Finance Payment Hub SCB Academy Academy set up People Training (foundations, digital, design thinking, …)
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Today! Page 27 / 43 We aim to acquire/engage digital customers and transform our cost base – ultimate goal is to open up new growth on a more scalable platform
Creating value from our digital transformation
Key value drivers: Top-line growth A (with new revenue stream) Acquire & Migrate
B Transact & Engage
C Transform cost structure
New capabilities (Tech/ Data/ People & culture) Lower cost base/ Higher productivity (without impact to customer services)
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 28 / 43 A Acquire & Migrate: Acquisition gaining positive momentum with significantly larger digital customer and merchant base
~7.6m digital users 1/ ~1.0m QR merchants
No. of digital users (SCB EASY) 7.6 No. of merchants
1.0 million 3x with >60% SCB EASY Pay 2.5 active users ~250x 4,000 (Mae Manee)
3Q’17 Aug’ 18 2Q’16 Aug’ 18 2018 target: 9-10 mn digital users 2018 target: 1.2-1.5 mn merchants
~7.7m PromptPay users (Retail) % Share of digital onboarding
(As of Aug-18) Individual Juristic
2/ 3/ 95% 85% #1 #2 Digital Digital onboarding onboarding Mobile users Total users (>28% market share) (ID and Mobile) With 50%+ time saving With 90%+ time saving for account opening for account opening
1/ Mobile and internet banking; 2/ All commercial banks and SFIs banks ; 3/ Among all commercial banks Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 29 / 43 B Transact & Engage: Digital customers are more engaged and contribute higher revenue with digital sales through SCB EASY gaining importance
Digital users have higher revenue, hold more products and spend more on credit cards
(Per customer as of Jul-18) Non-MOA MOA: Traditional 1/ MOA: Digital 2/
Avg. revenue per month Avg. product holding Avg. credit card spending
~1.0x 1.5x +1.5 2.6x 1.8x +2.8
MOA = Main Operating Account 1/ MOA customers who are non-digital users / inactive digital users 2/ MOA customers who are active digital users Mutual Funds – Sales through SCB EASY becoming more important
Purchased fund thru EASY Mutual fund customers 44% 29% 15pp % Digital share of mutual ~44bn fund active customers1/ 45% THB Mutual fund transaction volume Purchased funds 31% 14pp thru EASY % Digital share of total transaction volume Jan’18 – Aug’ 18 Jan-Aug’17 Jan-Aug’18 1/ Customers who purchase, redeem or switch funds through EASY channel Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 30 / 43 B Transact & Engage: Strong growth of our transactional banking/ payment platform leading to higher market share
Financial transactions through digital channel growing faster than the market
No. of financial transactions thru SCB EASY1/ No. of financial transactions (million transactions) thru SCB EASY per customer 53 per month1/ (transactions)
13 2.7x
1.6x 8 20 1.7x
12
Jan-17 Aug-17 Jun-18 Aug-17 Jun-18
%Market 13% 15% 23% share2/
SCB Easy launched 1/ Financial transactions including transfer, bill payment, top-up transactions 2/ Source: Market data from BOT Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 31 / 43 C Transform cost structure: Customers' behavior shifting towards digital with transaction volume migrates to SCB EASY
Customers becoming less reliant on branches Share of branch transactions declining
Relative no. of SCB’s customers by behavioral type SCB’s transaction volume1/ mix (Monthly) (Index, no. of individual customers as of Jan 2018 = 100) Cost per txn2/ (indexed to branch txn cost) Jan-18 Jul-18 121 14% 100 100 100 96 33% 42% Digital 47% (Internet/ 4-5 79 Mobile)
69% 54% 49% Machine 10 46% (ATM/CDM)
17% 13% BranchHeavy Traditional branch MultiMulti Channel-channel user TechDigital Focus user user 9% 7% Branch 100 useruser user Jan-17 Jan-18 Jun-18 Aug-18
Heavy branch user: Visit branch every 1-2 weeks, low digital usage Multi-Channel user: Visit branch 2-3 times / quarter, otherwise use digital channel 1/ Payment, transfer and top-up Digital user: Use digital channel for most transactions, visit branch 1-2 times / year 2/ txn = transaction
No. of branch closed: 3Q18F ~125 branches
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 32 / 43 We are also transforming our digital customer experience as the key enabler for driving customer engagement and satisfaction
Individual Juristic Personal loans onboarding onboarding Credit card
20 mins 15-30 days 3-5 days 7 days
* 10 mins 30 mins < 5 mins* < 5 mins
* Prequalified customers * Prequalified customers for loan approval and for virtual card approval booking through through SCB EASY SCB EASY
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 33 / 43 High investments for the transformation program temporarily raised C/I, peak C/I expected near the end of 2018 to the beginning of 2019 followed by a gradual decrease to a new lower C/I operating range post transformation
Cost-to-income ratio (C/I) Percentage 50% C/I – Change the Bank C/I is expected to peak in the mid-to-high 40’s range C/I – Run the Bank Change-the-bank cost is 45% estimated to increase C/I by around 5-6% in 2018
Pre-transformation CAPEX depreciation and 40% Avg. ~38% expense from THB 40 Bn Transformation program
35% Post-transformation Avg. low 30-s 30%
25%
20% 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E Estimate (E)
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 34 / 43 ▪ APPENDIX I: SCB’s key recent awards and recognitions
▪ APPENDIX II: Transformation update – examples of customer value propositions and recent initiatives launched
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 35 / 43 SCB’s key recent awards and recognitions
The Asset Triple A Digital Finance Asia’s Country Money & Banking Awards Awards 2017 Awards 2018 2017-2018
• Digital Bank of the Year • Best Bank in Thailand • Best Financier of the year • Best Retail Mobile Banking Experience • Best Investment Bank in Thailand • Best Public Company – Financial Industry • Most Innovative Mobile Banking Application • Best Private Bank in Thailand • Best Service Provider – Personal Loan “SCB EASY” • Best Belt and Road Bank • Best Service Provider – Credit Card • Most Innovative ATM Project “Cardless ATM” • Best Mutual Fund of the Year (LTF)
Financial Insights Innovation Asian Banking & Finance Awards 2018 Retail Banking Award 2018
• Asia’s Most Transformative Bank • Service Innovation of the year • Branch Innovation of the year
Asia Money Banking Award 2018
Bangkok International Digital • Best Digital Bank Content Festival 2018 • Best Corporate and Investment Bank
• Best Character for Commercial Use Award (Mae Manee) Alpha SEA Annual Best Financial Institution Awards 2018
• Best Bank 2018
Corporate Governance Asia's 8th Asian Excellence Award 2018 Global Finance Magazine
• Asia’s Best CEO – Mr. Arthid Nanthawithaya • Best Private Bank in Thailand • Asia’s Best CFO – Mrs. Kittiya Todhanakasem • Innovator Awards 2018 Prime Minister’s Digital Award 2018 • Best Investor Relations Company (Thailand) • Best Consumer Digital Bank (Thailand) • Best in Social Media Marketing & Services • Digital Organization of the year
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 36 / 43 SCB has been selected as a member of DJSI World and DJSI Emerging Markets Indices in 2018 scoring top-six among global banks
The Dow Jones Sustainability Indices (DJSI), created jointly by S&P Dow Jones Indices and RobecoSAM, evaluate the sustainability performance of global corporations across sectors In 2018, SCB has been selected as a member of Assessment criteria focus on long-term economic, social and environmental asset management plan. Evaluations are performed in parallel with analysis of financial performance. DJSI World DJSI Emerging Index Markets Index (Among all 27 (Among all 15 9 Thai companies listed on DJSI World Index banks from 201 banks from 106 invited banks) invited banks) Company: RobecoSAM Industry:
Siam Commercial Bank Banks
Kasikornbank Banks SCB’s score
PTT Oil & Gas Upstream & Integrated of global banks industry ranking PTT Exploration & Production Oil & Gas Upstream & Integrated #6
Thai Oil Oil & Gas Refining & Marketing Rank: Bank name: Country:
CP ALL Food & Staples Retailing 1 Bancolumbia SA Columbia
Thai Beverage Food, Beverage & Tobacco 2 KB Financial Group Inc Korea 3 Banco Santander SA Spain PTT Global Chemical Chemicals 4 ABN AMBRO Group NV Netherlands Siam Cement Construction Materials 5 First Financial Holding Co Ltd Taiwan
Central Pattana Real estate 6 Siam Commercial Bank PCL Thailand Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 37 / 43 SCB wins international recognition with 6 innovation awards, highlighting the success of tech innovation in providing services for corporate clients
StartBiz – The new innovative juristic onboarding Awards & recognitions
“StartBiz” is a digital platform featuring the most modern electronic know-your-customer (KYC) and authentication innovation (e-KYC & e-Signature) tools. It streamlines back-office processes and operations to provide corporate clients with a better customer experiences Asian Banking & Finance ▪ Branch innovation of the ANYTIME Year – Silver NO DOCUMENTS ONCE AND DONE ANYWHERE ▪ Service innovation of the year - Thailand
The Asian Banker ▪ The Best branch digitization initiative – Thailand 15 Physical Documents ▪ The Best API initiative
▪ Setup profile ▪ Business alert Reduced to ID Card ▪ Local collect กรุณาวางเอกสารภายในกรอบที่ ▪ Own account transfer The International Banker กาหนด ▪ 3rd party transfer ▪ The Best customer service ▪ iCheque book ▪ ORFT provider, Asia ▪ Payroll direct credit ▪ Smart payroll ▪ Direct credit ▪ Fully digital and audit trail ▪ BahtNet ▪ Integration to link business process with one digital ▪ PromptPay Global Finance Magazine customer’s data from signatory on iPad ▪ QR and IR ▪ Global financial innovators Ministry of Commerce ▪ No Branch Visit Required ▪ EDC - Digital Business Account directly Opening
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 38 / 43 ▪ APPENDIX I: Recent awards and recognitions
▪ APPENDIX II: Transformation update – examples of customer value propositions and recent initiatives launched
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 39 / 43 Examples of our core value proposition in the focused areas which will emphasize on improving customer experience
Beyond Focused areas for Personalized & Anytime, Simple & Engaging financial Delightful growth contextualized anywhere seamless needs ✓ ✓ ✓ ✓ Personal Individual credit line Digital loan application Information pre-filled Send offers to pre- based on risk score and 24/7 with immediate based on data − qualified customers lending customer income funds usage via EASY pre-qualified customers based on behavioral High-yield platform can complete process triggers (e.g., low lending in less than 5 mins balance)
SSME ✓ ✓ ✓ Select offers from Digital loan application Application on Easy business relevant product 24/7 platform with pre-filled lending programs forms
Wealth HNW,PB, management ✓ ✓ ✓ ✓ ✓ affluent, Suggest investments Execute transactions on Onboard bank, mutual Robo-advisory with Triggers with advice on upper- based on individual Easy (for funds) funds and securities alerts how to reach goals mass risk/return preferences accounts in one go (as of November)
✓ ✓ ✓ ✓ ✓ ✓ Transaction Individual Predictive tiles for Open account with Barcode scan, 1-click to Free digital transactions, Lifestyle offers: cinema, Easy bonus offers and banking expected upcoming biometrics 24/7 pay SCB bills / cards bonus offers donations, gifts rewards transactions
Simple onboarding to ✓ ✓ transacting✓ Business Cash flow history, Transaction approval via Simple and convenient and convenient cash favorite transactions separate app / Apple cash management management watch Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 40 / 43 Leveraging digital capabilities to deliver exceptional customer experience
Onboarding Digital advice
Individual customers Life insurance ▪ 50%+ time saving iPlan – Needs-based for account opening advisory tool for life (from 20 mins to 10 insurance with a straight- mins) through processing ▪ 95% of new accounts opened with the digital onboarding Wealth management wPlan – Investment proposal based on Juristic customers customer’s risk profile; Mutual fund sales ▪ 90%+ time saving for account opening (from 15-30 days to 30 mins) Business solutions ▪ 85% of new SCB Rubik – accounts opened Relationship Manager with the digital tool Advisory tools for corporate customers
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 41 / 43 SCB Easy as the transaction, lifestyle and sales platform to enhance customer’s digital experience
Transaction platform Daily transaction and money management services ▪ Cardless ATM: >26 mn transactions (after a launch in September 2017) ▪ Freenomenon: Free fee for transfer/ bill payment/ top-up/ cardless cash withdraw via ATM
New way of working Lifestyle/ Engagement platform utilizing new tech foundations: Movie, Gift, Donation, Dining, EASY Bonus, My Deals ▪ >12mn lifestyle tile clicks per quarter • Monthly releases of ▪ Insights on customer’s lifestyle and behavior new features • Payment hub to scale capacity • AI for predictive Sales platform transactions • APIs/ Micro Mutual funds, Loan & credit card services for ▪ >THB 1.2 bn new loan booking (8M’18) integration with ▪ >THB 44 bn purchased funds (8M’18) partners
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 42 / 43 SCB Business Anywhere is a new cash management platform for corporate and SME customers
SCB Business Anywhere
(Official launch in Sep-18)
8:3 10 8:3 10 8:3 10 0 0 0 0 0 0 AM % AM % AM %
2 2 2
Quick Day-to- Financial Activity Approval Keeping Track of Day Operation Anywhere Workflow Business Dashboard helps users Tablet and mobile phone Approval workflow can be Easily monitor liquidity of monitor their financial trends. are able to create assigned by different business and FX rate via Live search helps users to payment easily via users and approvers can smartwatch search for required application or site also approve with any information devices on hand
Siam Commercial Bank PCL. | Investor Presentation | September 2018 Page 43 / 43