SCB X PCL: Not too late to ride the upside
Related Stories
- Upgrade to BUY with a higher TP of THB135
- 2Q25 earnings came in at THB12.8bn (+27.7% y/y; +2.3% q/q), beating expectations by 18% due to stronger-than-expected non-interest income
- Asset quality improved, while effective cost control was also key to supporting the bottom line
- Committed to a high dividend payout; expect a DPS of THB11.10 for FY25, implying a dividend yield of 9.2%
Results beat expectations on higher-than-expected non-interest income. 2Q25 earnings came in at THB12.8bn (+27.7% y/y; +2.3% q/q), beating the Bloomberg consensus and our estimate by 18%, thanks to higher-than-expected non-interest income (non-NII).
The y/y increase was attributed to higher non-NII (from higher gains on financial instrument designated at fair value through profit or loss [FVTPL] – from revaluation of SCB 10X’s investments – and higher gain on investments), lower operating expenses (OPEX), and lower credit cost.
Meanwhile, the q/q increase was thanks mainly to higher non-NII from higher gains on financial instrument designated at FVTPL and higher gain on investments.
Pre-provision operating profit (PPOP) increased 2.1% y/y but declined 2.2% q/q. The y/y increase was thanks to higher non-NII and lower OPEX, while the q/q decline was due to lower net interest income (NII) – from loan and net interest margin (NIM) contraction – and higher OPEX.
1H25 earnings accounted for 54% of our revised full-year forecast.
Loans contracted 1.6% y/y, 1.2% q/q, and 0.2% YTD-Jun. The decline reflected broad-based reductions across all segments at SCB Bank, as well as a contraction in the Gen 2 loan portfolio, primarily driven by Card X.
Corporate loans declined 1.7% q/q but increased 2.3%YTD. The YTD increase was driven by strong demand from large corporates. SME loans decreased 1.1% q/q and 1.3% YTD, due to loan repayments and tightening of new loan booking requirements.
Retail loans declined 0.8% q/q and 1.2% YTD, due mainly to the decrease in auto loans (-8.7% YTD) – from loan repayments and the bank’s strategy to scale down its hire purchase (HP) portfolio – and unsecured loans (-15.0% YTD). Meanwhile, housing loans increased 0.3% YTD, thanks to the demand for high-end housing developments and the bank’s strategy to maintain its market share for housing loans.
Loans under subsidiaries (including loans from Card X, Auto X, MONIX, Abacus digital, and Innovest X) declined 6.1% YTD to THB173.3bn (approx. 7% of total loans at end-2Q25).
Card X loans (including personal loans and credit card loans) declined 12.4% YTD to THB87.6bn at end-2Q25 due to Card X’s tighter underwriting criteria for new bookings, run-down of Speedy Loan product, and reduced exposure to the self-employed segment in the personal loan portfolio.
Auto X loans declined by 2.6% YTD to THB51.3bn at end-2Q25, reflecting Auto X’s cautious approach to risk management and new loan underwriting. Moreover, Auto X has recently focused more on cash collection, while most of the new bookings were land title loans, instead of car title loans.
NPL ratio improved; coverage ratio increased. NPLs decreased 2.4% q/q to THB96.1bn. NPL ratio improved to 3.31% at end-2Q25 (vs. 3.45% at end-1Q25). The q/q improvement was attributed to better asset quality in the SME and auto hire purchase portfolios. Gen 2 NPLs also declined, driven by Card X, while Auto X saw slightly higher delinquencies.
As such, for Auto X, management has shifted its focus to cash collection rather than growth. In the meantime, it has moved toward more secured land title loans and away from auto title loans to manage risks.
Meanwhile, management mentioned that the “You Fight, We Help” programme also helped to reduce Stage 2 and Stage 3 loans in 2Q25. So far, about THB50bn in loans (approx. 2% of SCB’s total loans) have been included in the programme.
In the meantime, SCB sold THB1.8bn and wrote off THB9.0bn of NPLs in 2Q25 (vs. THB8.5bn written off but no NPL sales in 1Q25).
The bank set aside an expected credit loss (ECL) of THB10.1bn (-13.0% y/y; +5.7% q/q) in 2Q25, i.e., a credit cost of 177bps in 2Q25 (vs. 201bps in 2Q24 and 167bps in 1Q25). Of the ECL recorded in 2Q25, THB900mn was considered management overlay to cushion against future macro uncertainties.
With that, coverage ratio increased 159% at end-2Q25 (vs. 156% at end-1Q25).
Capital position remained strong. CAR stood at 19.0%, with Tier 1 ratio at 17.9%, compared with the BOT’s minimum requirements of 12.0% and 9.5%, respectively.
Outlook:
NIM to decline further on lower yield. SCB expects two more policy rate cuts (a total of 50bps) in 2H25, which will further impact yields in the quarters to come. On top of the impact from rate cuts, NIM will also be pressured by SCB’s quality growth strategy and interest income foregone from the “You Fight, We Help” debt restructuring programme.
However, management believes its funding cost management should help mitigate the impact and expects FY25F NIM to remain within its guidance (of c.25bps reduction from FY24).
Loan growth likely misses the target. SCB initially targeted loan portfolio growth of 1-3% in 2025; however, given the macro uncertainties, management prioritises quality and focuses on growing only selected corporate loans.
Nonetheless, it reiterated its commitment to expanding the Gen 2 loan portfolio, however, with product mix shifting toward (more secured) land title loans.
Cost control is key to support the bottom line. C/I ratio was impressive at 40.0% in 1H25 (i.e., 39.9% in 1Q25 and 40.2% in 2Q25). This was thanks to the company’s effective cost control and no losses from Purple Venture (i.e., Robinhood). Management believes FY25F C/I ratio will be lower than the 42-44% target, and this will help support its bottom-line growth amid the challenges facing revenue generation.
Credit cost remains a wild card. SCB forecast 2025 GDP growth at 1.5% with a view for export and private investment to contract in 2H25 due to front-loaded exports in 1H25 and the uncertainty over the US tariffs to be in effect in Aug 2025.
Given the THB700mn and THB900mn management overlay for macro uncertainties set aside in 1Q25 and 2Q25 and the company’s improving asset quality, it is possible that credit cost will be lower in 2H25F. Note that we currently assume a credit cost of 180bps in 2H25F (vs. 172bps in 1H25).
SCB’s 2025 targets vs. DBSVTH’s assumptions
| SCB | DBSVTH (previous) | DBSVTH (revised) |
Loan growth | 1-3% | 0.5% | -0.2% |
NIM | 5-25bps lower | 24bps lower | 27bps lower |
Net fee income growth | 2-4% | 1% | 0% |
Cost-to-income ratio | 42-44% | 41.7% | 41.2% |
Credit cost (bps) | 150-170bps | 177bps | 176bps |
Source of all data: Company, DBSVTH
High dividend payout committed. Given its strong capital position and the current economic situation, which is not conducive to balance sheet expansion, management reaffirmed its commitment to maintaining high dividend payout of 80%. We estimate SCB to pay a DPS of THB11.10 for FY25F, implying a dividend yield of 9.2%.
Upgrade to BUY with a higher TP of THB135. As we incorporated 2Q25 results and fine-tuned our key forecast assumptions, we raise our FY25F earnings by 6% and derive a higher TP of THB135 (vs. THB124 previously), based on 0.97x FY25F P/BV, i.e., 0.5SD below its long-term average P/BV. With its improving asset quality and attractive dividend yield, we upgrade SCB to BUY (from HOLD). At the current share price, the counter offers a total potential return of 20.8%.
SCB: 2Q25 results summary
THB mn | 2Q25 | 2Q24 | y/y (%) | 1Q25 | q/q (%) |
NII | 30,404 | 32,576 | (6.7) | 31,047 | (2.1) |
Fee income, net | 7,410 | 7,529 | (1.6) | 7,627 | (2.9) |
Non-NII | 13,247 | 10,678 | 24.1 | 11,949 | 10.9 |
Total operating income | 43,651 | 43,253 | 0.9 | 42,997 | 1.5 |
Total operating expenses | 17,530 | 18,568 | (5.6) | 17,140 | 2.3 |
PPOP | 25,119 | 24,597 | 2.1 | 25,681 | (2.2) |
ECL | 10,112 | 11,626 | (13.0) | 9,570 | 5.7 |
Net profit | 12,786 | 10,014 | 27.7 | 12,502 | 2.3 |
EPS (THB) | 3.80 | 2.97 | 27.7 | 3.71 | 2.3 |
% | 2Q25 | 2Q24 | y/y (ppts) | 1Q25 | q/q (ppts) |
NIM (bps change) | 3.88 | 4.25 | (37.1) | 3.97 | (9.5) |
ROAA | 1.49 | 1.18 | 0.3 | 1.47 | 0.0 |
ROAE | 10.29 | 8.23 | 2.1 | 9.98 | 0.3 |
Cost-to-income ratio | 40.16 | 42.93 | (2.8) | 39.86 | 0.3 |
Credit cost (bps) | 176.69 | 200.63 | (23.9) | 167.04 | 9.7 |
THB bn | 2Q25 | 2Q24 | y/y (%) | 1Q25 | q/q (%) |
Loans | 2,276 | 2,313 | (1.6) | 2,303 | (1.2) |
Deposits | 2,465 | 2,457 | 0.3 | 2,471 | (0.3) |
% | 2Q25 | 2Q24 | y/y (ppts) | 1Q25 | q/q (ppts) |
LDR | 92.33 | 94.11 | (1.8) | 93.17 | (0.8) |
LDR+borrowings | 88.14 | 89.77 | (1.6) | 89.24 | (1.1) |
Coverage ratio | 158.74 | 161.73 | (3.0) | 156.09 | 2.7 |
NPL | 3.31 | 3.34 | (0.0) | 3.45 | (0.1) |
CAR | 19.00 | 18.76 | 0.2 | 18.80 | 0.2 |
T1 | 17.90 | 17.65 | 0.3 | 17.70 | 0.2 |
T2 | 1.10 | 1.11 | (0.0) | 1.10 | 0.0 |
Source of all data: Company, DBSVTH
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVTH.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.
There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBS Bank Ltd, DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report has been prepared by a personnel of DBS Bank, who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited (''DBS HK''), a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Commission, Thailand. For any query regarding the materials herein, please contact Chanpen Sirithanarattanakul at [email protected] |
United Kingdom | This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBSVTH. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG | SINGAPORE |
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: William Simadiputra DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected] | THAILAND |