2 nd Quarter, 2012 Results ANALYST MEETING, 27 JULY, 2012
Agenda Page 1. Review of Result 2Q12 3-19 2. Future Positioning 21-25 3. 2012 Targets 27 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 norepresentation or warranty of any type whatsoever on the accuracy or completion of the information contained herein. The 2Q12 results are based on unaudited financial statements and are subject to change following completion of the audit. Page 2
2012 TARGETS AND 1H12 RESULTS 2011 ACTUAL PROFITABILITY LOAN COST AND INCOME ASSET QUALITY CAPITAL 2012 TARGETS 1H12 ACTUAL ROE 18.4% 17-19% 21.2% ROA 1.9% 1.8-2.0% 2.1% NIMs 3.26% 3%+ 2/ 3.20% Total loan growth (yoy) 22.1% 12-14% 20.2% Non-NII growth (yoy) 20.7% ND 15.7% Net fee & insurance premium growth 26.8% 15%+ 13.4% Cost to income 42.9% 43-44% 39.9% NPLs (gross) 2.61% 2.5% 2.25% Capital Adequacy Ratio 14.5% ND 15.2% Tier I 11.2% ND 10.6% 1H12 RESULT (Highlights) -Record high half yearly net profit ofbaht 20.4 billion(growth of 26.6% yoy) -Sharp loan growth of 20.2% yoyacross all business segments with significant gains in SME and Auto loans - Strong Non-NII growth in net insurance premium and net trading income -NPLs dropped to 2.25% of total loans, a post 1997 crisis low DISTRIBUTION Branches 1,094 1,150+ 1,112 ATMs 8,459 8,500+ 8,590 = On track to target or higher ND = Not disclosed Excluding Bt 5.1bn one-time investment revaluation gain on acquisition of additional shares in SCB Life. If this gain was included, the 2011 Net Profit would stand at Bt 36.3billion, the ROE at 21.3%, ROA at 2.2%, Non-NII growth at 37.9%, and Cost-to-income at 40.5%. 2/ Dependent on the interest rate environment and a decision on the FIDF/Deposit insurance charge. Page 3
PERFORMANCE HIGHLIGHTS Page 1. Strong Net Profit 5 2. Strong growth in NII 6 3. Improved asset quality 9 4. Steady Non-NII growth momentum 12 5. Strong deposit growth 14 6. Effective cost control 16 7. Solid capital base 17 Page 4
STRONG NET PROFIT WITH HIGH ROE & ROA Strong Profits Net profit increased by 23.9% yoy in 2Q12 to Baht 10.1 billion, while operating profit increased by 24.1% yoy to a record Baht 15.0 billion Solid profitability reflected in high ROE and ROA Net Profit (Baht billion) +23.9% yoy -2.6% qoq ROE (Percentage) Operating profit (Baht billion) +24.1% yoy +2.3% qoq ROA (Percentage) Page 5
STRONG GROWTH IN NII The growth in NII yoy was the result of strong loan growth, higher interest rates, an increased proportion of higher yield loans, and a larger investment portfolio Higher NII The improvements in yield on loans and well-managed cost of funds have led to higher net interest margin Net Interest Income (Baht billion) +20.9% yoy +7.1% qoq Yield of Earning Assets, NIM and Cost * (Percentage) Yield on Earning Assets Net interest margin Cost of funds * The Bank started to accrue for the additional FIDF fee on deposits and certain types of borrowings since 1Q12. Yield on Loans 5.36% 5.81% 5.96% 6.02% 6.13% Cost of Deposits 1.59% 1.84% 2.05% 2.20% 2.24% Page 6
DRIVEN BY ROBUST LOAN GROWTH ACROSS ALL SEGMENTS Robust Loans Growth 20.2% yoy loan growth was broad-based while 4.8% qoq expansion was mainly from the Bank s strategic focus on SME and auto lending segments Loans (Baht billion) (43.6%) +20.2% yoy +4.8% qoq Wholesale Loans (Baht billion) SME Loans (Baht billion) Market Share Top 3 +10.2% yoy Market Share #4 +31.0% yoy +2.0% qoq +6.3% qoq Loans breakdown (as at Jun 30, 2012) Wholesale 40.0% (43.6%) SME 19.1% (17.6%) Retail 40.9% (38.8%) Retail Loans (Baht billion) 457 496 513 541 579 Market share #1 +26.7% yoy, +7.0% qoq Others 2/ +24.9% yoy, +6.1% qoq Auto +47.5% yoy, +10.6% qoq (market share 16.4% 3/,#3) Mortgage +20.4% yoy, +5.8% qoq (market position #1) ( ) : Loan breakdown as at Jun 30, 2011 Includes loans classified as NPLs 2/ Others includes mainly credit cards and unsecured consumer loans 3/ Market share among the top 5 auto loan lenders, excluding captive finance companies), as of June 2012 Page 7
AND A LARGER COMPONENT OF HIGHER-YIELD LOANS A Larger Component of Higher-yield Loans Contribution from higher-yield SME and Retail continued to rise in line with SCB s strategy. At the same time, yield moved higher in both these segments. Loan breakdown (Percentage) Others Auto lending Mortgage Yield on Loans by Segment (Percentage) SME Retail Wholesale SME Wholesale Others includes mainly credit cards and unsecured consumer loans Yield on Selected Retail Products (%) Mortgage Auto Loans 5.2% 5.5% 5.6% 5.8% 6.0% 5.4% 5.1% 5.6% 5.8% 5.7% 2/ 2/ The overall yield is a blended yield for both new cars and used cars. The blended yield is influenced by the sharp growth in 2Q12 in the new car segment (which has lower yields) on the back of record new car sales during the quarter. Page 8
ASSET QUALITY CONTINUED TO IMPROVE AS SHOWN BY LOWER NPLs, WHILE NPL COVERAGE ALSO INCREASED NPLs fell to 2.25%, the lowest level since the 1997 crisis, due to proactive work-out practices, and the Bank s preemptive strategies to prevent new NPL formation. The improvement was broad based. Improved Asset Quality Given the increasingly negative global economic environment and its potential impact on Thailand, the Bank has prudentially set aside an additional provision of Bt 1bn as a cushion for future uncertainties, in addition to a normalized level at Bt 1.5bn per quarter on a bank basis. Gross NPL ratio & NPL Coverage ratio (Percentage) NPL Coverage ratio Provisions (Consolidated, Baht billion) * +183.7% yoy +63.5% qoq * * Gross NPL% * Includes additional one-time provisions of Baht 1 billion in 3Q11, Baht 2.3 billion in 4Q11, and Baht 1.0 billion in 2Q12. NPL by Segment and by Product Wholesale SME Retail Mortgage Auto Loans 2.3% 2.8% 2.3% 2.1% 2.1% 7.3% 6.2% 5.7% 5.3% 4.7% 2.2% 1.8% 1.9% 1.9% 1.8% 2.4% 1.8% 2.0% 2.0% 1.8% 1.8% 2.1% 2.5% 2.3% 2.0% Credit Costs (bps) 29 62 97 44 68 Page 9
NPL WELL UNDER CONTROL DESPITE FLOOD IMPACT Excess Reserves Given the expiration of the BOT forbearance for flood impacted customers, special mention loans increased in 2Q12. However, the Bank expects the increase in NPL to be lower than the initial forecast (late last year) of 40-50 bps The Bank has established reserves well in excess of BOT regulations Special Mention (Baht billion) Excess Reserves and Proportion of Loan Loss Reserves to Required Reserves (Baht billion, %) Excess Reserves LLR / BOT Required Reserves Page 10
INDEPENDENT AND ROBUST RISK MANAGEMENT Effective Risk Management An effective Risk Management function The Bank has a robust Risk Management Framework with an independent governance structure, to ensure that risks are managed efficiently and effectively. Reporting directly to the President, the Risk Management Group is independent of the origination units. Over the past 9 years, the risk management group has not only grown in size but has, in addition, acquired the analytical and modeling capability necessary to monitor risk effectively. The Bank s effective and sound credit risk management practices has contributed to a steady improvement in asset quality, with the gross NPL ratio more than halved from 5.14% in 2008 to 2.25% as of June 30, 2012. has resulted in the highest ratings among Thai financial institutions Long-Term Foreign Currency Senior Unsecured Note Outlook BFSR 2/ Baa1 A3 Stable C- BBB+ BBB+ Stable - 3/ BBB+ BBB+ Stable C Rating assigned to the Bank s USD2.5bn Euro Medium Term Note (EMTN) program issued in 2011 2/ Bank Financial/Fundamental Strength Ratings 3/ S&P no longer assigns BFSR ratings to banks with effect from December 6, 2011 Page 11
STEADY NON-NII GROWTH MOMENTUM Strong Non-NII Non-NII grew 19.4% yoy in 2Q12, primarily due to higher net fee and insurance premium income, net trading income, and higher gain on investment. Non-Interest Income (Baht billion) +19.4% yoy -2.3% qoq 8.3 9.9 8.2 10.1 9.9 Gain (Loss) on Investment Other income Gain on trading and FX Net fee and Net insurance premium 2/ 40% 42% 38% 42% 39% Non-NII % to total operating income 30% 32% 27% 29% 29% Net fee and net insurance premium % to total income Other income includes income from equity interest in affiliated companies, dividend income, and other operating income. Page 12
FIRMLY ANCHORED ON CONTINUED GROWTH IN FEE INCOME Net fee and insurance premium income grew 17.7% yoy from a continued focus on fee based activities in all business segments Higher Fee and Insurance Premium Income The yoy growth was driven by higher fee income from insurance products, loan related transactions, and GMTS products Net Fee and Insurance Premium by BU (Baht billion) 71% 9% 20% 6.2 70% 11% 19% 7.4 +17.7% yoy Wholesale +16.7% yoy SME +37.3% yoy Retail +15.6% yoy Net Fee and Insurance Premium Breakdown (Percentage) Others Loan related fee Mutual fund Bancassurance and net insurance premium GMTS 2/ Bank cards % Share % Share 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 Page 13
STRONG DEPOSIT FRANCHISE SUPPORTIVE OF LOAN GROWTH Strong Deposit/BE Growth Total deposits and Bills of Exchange (BE) continued to grow despite a decrease in BE given the new regulatory requirement under which banks will be required to pay the full deposit protection fee on BE (previously exempt). SCB therefore has curtailed the growth or renewal of BE, resulting in a 52.5% yoy and 34.1% qoq declines in BE in 2Q12. Some of these BE have been channeled to the Bank s deposit products on maturity. Total Deposits + BE (Baht billion) +17.8% yoy +4.4% qoq Deposits (Baht billion) 1,098 1,116 1,184 1,309 1,414 +28.8% yoy +8.0% qoq Current Savings Fixed Bills of Exchange (Baht billion) -52.5% yoy -34.1% qoq 172.3 248.7 216.7 124.4 81.9 CASA Current & Savings Accounts (%) 59% 58% 56% 54% 54% Bill of Exchange is a borrowing instrument and is akin to an uninsured deposit in the Thai market. Page 14
LIQUIDITY REMAINS AT A COMFORTABLE LEVEL Ample Liquidity The Bank s loan to deposit + BE ratio rose slightly in 2Q12, while the loan to deposit ratio improved as the Bank shifted its focus away from BE towards deposits. The Bank monitors its liquidity daily and has set its minimum liquidity ratio (liquid assets dividedbytotaldepositsandbe)at20%.this is well in excess of the regulatory threshold. Loan to Deposit Ratio Liquidity Ratio Loan to Deposit 94%-96% Loan to Deposit + Bills of Exchange (BE) 20% The Bank expects deposits (including BE) to grow in tandem with loan growth in order to keep LDR within a comfortable range. BE or Bills of Exchange are included in deposits as they are essentially akin to uninsured deposits Liquid assets primarily comprise cash, deposits and bilateral repo with the Bank of Thailand as well as investment in government securities Page 15
IMPROVING COST TO INCOME RATIO Effective Cost Management Operating expenses rose 15.0% yoy partly due to a one time adjustments to premises expenses made in 2Q11 which significantly reduced these expenses in the earlier quarter and partly due to the ongoing investments in network and systems enhancements to support business growth. Cost to income ratio remained well managed at 40.1% in 2Q12 Operating Expense (Baht billion) +15.0% yoy +4.5% qoq Cost-to-Income Ratio (Percentage) 2011A : 42.9% 2012 Target 42-43% Excluding the one-time investment gain in 1Q11. If this gain is included, the cost to income ratio would stand at 40.5%. Page 16
STRONG CAPITAL BASE TO SUPPORT GROWTH AND EMERGING REGULATORY REQUIREMENTS The Bank believes its solid capital position will provide the flexibility to grow its business in a timely manner as growth opportunities arise in the near future, in addition to providing a cushion against unexpected shocks and new Basel III requirements Capital Base Capital Adequacy Ratio (Bank only) Basel II Standardized Approach Tier II Tier I 14.4% 15.0% 14.5% 15.6% 15.2% Should the 1H12 net profit be taken into consideration, CAR would stand at 16.8%, while Tier I would stand at 12.1%. Page 17
SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS Highest Net Profit (Consolidated, Baht billion) Highest ROA (Percentage) Competitive Positioning 1H12 Net profit 1H12 ROA Source: Commercial banks 2Q12 financial results Highest Market Cap (Baht billion) Source: Commercial banks 2Q12 financial results High Tier I (Percentage) Market Cap. as at Jun 29, 2012 1H12 Tier I Source: Stock Exchange of Thailand s website Source: Commercial banks 2Q12 financial results Page 18
SCB RETAINS A STRONG COMPETITIVE POSITION AMONGST THE BIG THAI BANKS (cont d) Highest Loan Growth(1H12 vs. 1H11) (Percentage) Highest Proportion of Non-NII(1H12) (Percentage) Competitive Positioning Non Interest Income to Total Income Source: Commercial banks 2Q12 financial results Lowest Cost to Income Ratio(1H12) (Percentage) Source: Commercial banks 2Q12 financial results Largest Branch & ATM Network (as at Jun 30, 2012) # of Branches # of ATMs Source: Commercial banks 2Q12 financial results Source: Bank of Thailand s website, National ITMX Company Including net insurance premiums less net insurance claims Page 19
Agenda Page 1. Review of Result 2Q12 3-19 2. Future Positioning 21-25 3. 2012 Targets 27 Page 20
MACRO TRENDS FORECAST FOR 2012 Macro Estimates (%) 2011 Key drivers 2012 Comment and outlook 0.1 GDP growth 5.6-5.8 Thai GDP growth will be driven more from domestic demand recovery from flood, and less from exports due to weaker global economy. 3.8 Headline inflation 3.2-3.7 Global energy price eases, but robust domestic spending will exert some pressure on inflation. 3.25 Policy rate (end period) 3.00 No further cuts as the economic recovery is gaining pace. Upside risk still minimal since core inflation is projected to remain within the target range of BoT. 31.7 THB/USD (end period) 30-31 Long term trend of USD weakening against Asian currencies should continue, but with short term volatility from risk aversion. 15.0 Loan growth (sector-wide) 15.0 Loan growth will moderate slightly from exceptional growth last year, but remains robust from the need to repair and rebuild after flood. 13.1 Deposit+B/E (sector-wide) 12.0 Headwinds include: more competition from SFI, lower current account surplus, and new FIDF fee imposed on B/E. %YOY except for policy rate (% per annum) and exchange rate (THB/USD) Source: SCB EIC analysis as of April 2012 based on data from the Ministry of Commerce, Bank of Thailand, and Office of the National Economic and Social Development Board Page 21
KEY DELTA GROWTH DRIVERS OVER THE NEAR TERM, WITH THE ADDITION OF MORTGAGE LOANS AS THE FOURTH GROWTH ENGINE Delta Growth Major current initiatives to obtain market share growth, over and above business as usual: Wholesale Continued expansion of market share, particularly in terms of fee income from the larger enterprises in this segment Auto Loans Expansion of market share in the auto lending segment with the aim to be the #1 originator within 2-3 years, with a strong focus in 2012 on the used car market SME Gain further momentum from new SME business model, centered around gaining market share in the smaller end of this segment Mortgage New strategic focus to strengthen the #1 position in this segment Page 22
MAINTAIN TOP 3 POSITION IN LENDING WHILST GROWING FEE INCOME Delta Growth Wholesale WHOLESALE Wholesale Loans (Baht billion) EXISTING POSITION Among the top 3 in wholesale lending FUTURE POSITION Market leading position in most feebased products Remain as a top 3 lender Market Share Top 3 +10.2% yoy +2.0% qoq STRATEGIC THRUST: Continued push to capture more wallet-share of fee income in the large enterprise segment Greater focus on capturing a clients value chain product clusters or supply chain network In-depth expertise in specific segments to develop compelling customer propositions and solutions Upgrade service delivery platforms to enhance clients experience Includes loans classified as NPLs Wholesale Fee Income (Baht billion) +16.7% yoy +26.6% qoq Page 23
CONTINUED EXPANSION OF MARKET SHARE IN THE SME SEGMENT Delta Growth SME SME SME Loans (Baht billion) EXISTING POSITION Ranked #4 in the market FUTURE POSITION Ranked top 3 in the market Increase the SME loan volume with substantial uplift in fee income Market Share #4 +31.0% yoy +6.3% qoq STRATEGIC THRUST: Develop deepercustomer insights, particularly in terms of customer behavior and financial needs at each life stage of a business Adopt a solution based approach to address the current and future financial needs of each customer segment, with a strong focus on fee income Continue improving process efficiency and customer experience Includes loans classified as NPLs SME Fee Income (Baht billion) +37.3% yoy -5.1% qoq Page 24
MAINTAIN LEADING POSITION IN KEY RETAIL PRODUCTS AND CONTINUE TO BUILD MARKET SHARE IN MORTGAGE AND AUTO LOANS Delta Growth Auto Loans RETAIL Mortgage loans (Baht billion) EXISTING POSITION Leading positions in Mortgage, Credit Cards, Bancassurance FUTURE POSITION Maintain leading position in key products #1 in terms of loan origination for Auto loans Market Position #1 +20.4% yoy +5.8% qoq STRATEGIC THRUST: Continue to build market share in auto loans with an emphasis on the used car segment Widen the leading position on mortgage loan product through a sustained growth strategy Stronger focus on key customer segments through offering a differentiated proposition for each segment Further enhance product businessesthrough innovation in the product and delivery platform Increase productivity (end-to-end) of operations Auto loans (Baht billion) Market Position (Share 16.4% 2/ ), #3 +47.5% yoy +10.6% qoq Includes loans classified as NPLs 2/ Market share among the top 5 auto loan lenders, excluding captive finance companies, as of June 2012 Page 25
Agenda Page 1. Review of Result 2Q12 3-19 2. Future Positioning 21-25 3. 2012 Targets 27 Page 26
REVISED 2012 TARGETS PROFITABILITY ROE 2011 ACTUAL 18.4% Original 2012 TARGETS 17-19% 1H12 ACTUAL 21.2% Revised 2012 TARGETS 18-20% ROA 1.9% 1.8-2.0% 2.1% 1.9-2.0% NIMs 3.26% 3%+ 2/ 3.20% 3.1-3.2% LOAN Total loan growth (yoy) 22.1% 12-14% 20.2% 17-19% COST AND INCOME Non-NII growth (yoy) Net fee & insurance premium growth 20.7% 26.8% ND 15%+ 15.7% 13.4% ND 15%+ ASSET QUALITY Cost to income NPLs (gross) 42.9% 2.61% 43-44% 2.50% 39.9% 2.25% 42-43% 2.25% CAPITAL Capital Adequacy Ratio 14.5% ND 15.2% ND Tier I 11.2% ND 10.6% ND DISTRIBUTION Branches 1,094 1,150+ 1,112 1,150+ ATMs 8,459 8,500+ 8,590 8,500+ Excluding Bt5.1bn one-time investment revaluation gain on acquisition of additional shares in SCB Life. If this gain was included, the 2011Net Profit would stand at Bt36.3billion, the ROE at 21.3%, ROA at 2.2%, Non-NII growth at 37.9%, and Cost-to-income at 40.5%. 2/ Dependent on the interest rate environment and a decision on the FIDF/Deposit insurance charge. = On track to target or higher ND = Not disclosed Page 27
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 norepresentation or warranty of any type whatsoever on the accuracy or completion of the information contained herein. The 2Q12 results are based on unaudited financial statements and are subject to change following completion of the audit. Page 28