annual report 2013 think of growth - Hong Kong Monetary Authority

238 Pages·2014·4.83 MB·English

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The Siam Commercial Bank
Public Company Limited TEL [phone] GROWTH
Company Registration FAX [phone]
Number 0107536000102 SCB CALL CENTER [phone] www.scb.co.th
9 Ratchadapisek Road, Jatujak, TELEX 82876 SIAMCOM TH / 20492 www.facebook.com/scbthailand
Bangkok 10900, Thailand SIAMBNK TH SWIFT BIC SICOTHBK www.twitter.com/scb_thailand
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CONTENTS
7
MESSAGE FROM THE BOARD OF DIRECTORS
11
BOARD OF DIRECTORS
25
ECONOMIC CONDITIONS AND INDUSTRY REVIEW
29
PERFORMANCE AND PLANS
45
RISK MANAGEMENT AND RISK FACTORS
53
CORPORATE GOVERNANCE REPORT
75
MANAGEMENT DISCUSSION AND ANALYSIS
97
FINANCIAL STATEMENTS AND NOTES
203
SUPPLEMENTARY INFORMATION
The Annual Report is part of a set that includes the Sustainability Report.
THINK SCB
THINKING IS WHAT HAPPENS EVERY DAY
TO EVERYONE AT EVERY STAGE OF LIFE.
FROM THE DAY WE WERE BORN
WE THINK UNTIL OUR LAST BREATH.

THINK OF A DREAM
THINK OF CREATIVITY
THINK OF WHAT TO BE
THINK OF A FAMILY
THINK OF THE FUTURE
THINK OF OUR SOCIETY

THINKING IS A CREATIVE PROCESS
THAT CAN LEAD TO SOMETHING NEW,
A STARTING POINT FOR ALL OUR SUCCESSES.
WHAT IS SCB THINKING?
SCB THINKS BEYOND BUSINESS. WE THINK
OF RETURNING GOOD THINGS TO SOCIETY.

THINK OF CONSERVING THE ENVIRONMENT
THINK OF CULTURE AND TRADITION
THINK OF GREEN LOGISTICS
THINK OF YOUTH DEVELOPMENT
THINK OF HUMANKIND

SCB BELIEVES EVERY THOUGHT IS VALUABLE,
NO MATTER HOW BIG OR SMALL,
WHETHER BUSINESS OR PERSONAL.
WE WILL ALWAYS BE TOGETHER WITH YOU,
SIDE BY SIDE IN EVERY STAGE OF LIFE.

WHATEVER YOU THINK, THINK SCB.
OUR VISION
TO BE THE BANK OF CHOICE FOR OUR
CUSTOMERS, SHAREHOLDERS, EMPLOYEES
AND THE COMMUNITY
OUR MISSION
TO BE THE BEST UNIVERSAL BANK
IN THAILAND
2013
FINANCIAL HIGHLIGHTS
4 ANNUAL REPORT 2013
PROFITABILITY NON-NII GROWTH
2013 record net profit driven by both higher NII and Strong growth in net fees and premium, dividend,
strong non-NII growth investment, and FX and trading
Net Profit Non-NII
(Consolidated, Baht billion) (Consolidated, Baht billion)
+28.0% yoy +23.6% yoy
50.2 50.5
39.2** 40.9
35.4*
31.2*
29.4
24.2 24.0
20.8
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
* Excluding Baht 5.1 billion one-time gain on SCB Life. * Excluding Baht 5.1 billion one-time gain on SCB Life.
If included, 2011 net profit would be Baht 36.3 billion. If included, 2011 Non-NII would stand at Baht 40.5 billion.
** Following the adoption of deferred tax accounting in 2013,
the prior year amounts for net profit have been restated.
Before such restatement, 2012 net profit would be Baht
40.2 billion.
ASSET QUALITY MARKET CAPITALIZATION
Stable non-performing loans ratio with rising reserve Despite the market volatility at the year-end, the SCB
coverage market capitalization remained the highest among
Thai financial institutions
Non-performing Loans (%) Market Capitalization*
and Reserve Coverage (%) (Baht billion)
(Consolidated)
Reserve Coverage (%) NPL (%)
4.41%
-20.9% yoy
3.25%
2.61%
2.13% 2.14%
617
488
144.8% 150.8%
352
127.1%
295 396
107.5%
95.4%
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
* Calculated by using share price at the last trading day of
each year
ANNUAL REPORT 2013 5
THINK OF
SAVING
THINK
Scb
6 ANNUAL REPORT 2013
MESSAGE FROM THE BOARD OF DIRECTORS
DR. VICHIT SURAPHONGCHAI MR. ANAND PANYARACHUN MRS. KANNIKAR CHALITAPORN
DEAR SHAREHOLDERS
After a few years of buoyant credit growth, the Thai economy devastating floods. Moreover, the long-awaited infrastructure
took a cyclical turn for the worse from mid-2013 onward. As spending was deferred due to challenges to the legality of the
domestic consumption fuelling economic growth overheated and funding modality and, over the past few months, by the prolonged
stalled, and the long-anticipated fiscal spending on infrastructure political impasse. Lastly, tourism, while exceptionally strong in
mega projects never really took-off, the underlying economy the first three quarters of the year, driven by significant increases
slowed, with credit growth running out of steam by the year- from mainland China visitors, started to experience sharp drop-
end. The ongoing political conflict, which had simmered in the offs in the last two months of the year, as the political conflict
distant background since mid-2010, resurfaced with a vengeance spread to central Bangkok.
at year-end, turning an already bad economic situation much
worse than anyone could have anticipated. Adding fuel to fire,
2013 Financial Results
the administrative and legislative organs of the government
turned rudderless. There is seemingly no acceptable solution to
The Bank reacted with caution to the headwinds from this
the political storm that has engulfed the Kingdom. Thus, the Thai
volatile economic climate but, at the same time, seized the
economy enters 2014 with a negative outlook and the distinct
available opportunities for profitable growth. As a result it ended
possibility of a prolonged down-cycle.
the year retaining its coveted #1 position in terms of market
capitalization and profitability across the Thai financial sector
The Thai Economy in 2013 and is now ranked 2nd in terms of assets and lending, a notch
higher than the previous year.
Thailand’s economy slowed dramatically in 2013, with GDP
growth falling to a below normal level of 2.9% from 6.4% in At the same time, we are honored to report that for the fourth
2012. This sharp drop resulted when domestic consumption, the successive year the Bank reported a record-high net profit. Net
economy’s major driver for the past few years, plateaued and profit in 2013 reached a historic high for the Bank and the industry
lost momentum, in part due to the expiry of the fiscal incentives at Baht 50.2 billion, representing 28.0% year-on-year growth.
that the government had propagated, particularly for first-car Alongside net profit, earnings per share (EPS) climbed to Baht
purchases. Concurrently, private investment was stemmed by 14.78 in 2013 from Baht 11.54 in 2012. Return on average equity
increasingly negative business sentiment, lackluster export (ROAE) increased to 21.8% in 2013 from 19.7% the year before,
growth in most categories, and the absence of any impetus while return on average assets (ROAA) rose to 2.1% from 1.9%
to rebuild factories as had occurred in early 2012 following the the year preceding.
ANNUAL REPORT 2013 7
The substantial increase in net profit was attributable to: higher While the Bank has an abiding recognition that its obligation
net interest income from continued broad-based loan growth as to society is on par with its obligation to shareholders, this is
well as the changing mix of the lending portfolio; solid growth the first year that it has compiled a systematic snapshot of
in net fee and insurance-premium income; exceptional gains in how it meets these broader responsibilities. Writing this report
dividend and investment income; and higher income from trading has helped the Bank to uncover gaps between its aspirations
and FX activities. These gains were partly offset by substantially and promises on the one hand, and its performance, on the
higher prudential provisions (an increase of Baht 4,245 billion over other. This has encouraged the Bank to set new goals and new
2013) despite a stable NPL ratio of 2.14% at the year-end and a measurements for success at closing these gaps. In 2014, the Bank
higher coverage ratio of 150.8%. Also, despite a healthy dividend will be working to further embed these sustainability aspirations
payout ratio, the Bank was able to maintain a solid Tier 1 capital into core business practices.
base of 12.0%, using the new Basel III framework in determining
capital adequacy.
Developments in Corporate
Governance Practices
Sustaining Profitability
In 2013, the Board augmented its corporate governance best
The Board is pleased to present the Bank’s first annual practices initiated in the prior year. These updates included:
Sustainability Report – together with this Annual Report -
• Completing the performance assessment of the Board, the
setting out its engagement with stakeholders and its social
chairman of the Board, individual directors and the Board
and economic contributions to Thailand in 2013. In brief, the
committees by using the assessment forms revised in 2012
Bank’s vision and commitment for sustaining profitability flows
by an external consulting firm.
instinctively from its core values, which we have named “iSCB,
comprising: • Selecting and nominating candidates for directorship from
the list of candidates proposed by shareholders and the
innovation – favoring innovative approach for all banking directors, after giving due consideration to the candidates’
products and services; qualifications, potential to add to diversity in terms of
knowledge, competence, experience, status within the
Social Responsibility – being proactive in meeting the wider community, gender, etc.
social obligations;
• Arranging for the performance assessment of the chairman of
Customer focus –making customers feel needed and satisfied; and the Executive Committee, the president, and senior executives
against predetermined targets and performance criteria, as
Building our people – continually nurturing staff growth well as approving their compensation.
and capacity.
In addition, given the development in corporate governance
These values form the building blocks for two crucial outcomes: standards (namely, the ASEAN Corporate Governance Scorecard,
contributions to the real economy and assuming a leadership SET’s corporate governance practices for listed companies, the
role in caring for the community. Thai Institute of Directors’ corporate governance report on Thai
listed companies), the Board has revised certain policies and
The Bank’s overall success has hinged on familiarity with practices to meet more advanced standards, for example: the
sustainability issues and the consequent astute management of whistle blower policy, training of directors, and the limit on the
stakeholder relationships – employees and management of the number of board seats held by a director.
Bank and its subsidiary companies, customers, creditors, business
partners and competitors, and the public, all who entrust their Changes in Board composition: At the 2013 AGM, the shareholders
capital or livelihood to the Bank – and outreach programs to appointed Mr. Prasan Chuaphanich as an independent director
communities, especially the younger members, which sustain and Pol.Gen. Adul Sangsingkeo as a director, representing the
the Bank’s business transactions. Ministry of Finance, replacing the seat vacated by the resignation
of Mr. Sumate Tanthuwanit and Prof. Thosaporn Sirisamphan,
This steadfast regard for societal well-being has contributed respectively. In addition, in July 2013, the Board appointed Mr.
most to the Bank’s positive outcome in community care, which Apisak Tantivoravong as an advisor to the Board of Directors.
encompasses the attention the Bank pays to the environment and The roles and responsibilities of the advisor requires attendance
all its stakeholders, especially its employees. This effort aims to at meetings of the Board of Directors in order to provide advice
achieve a healthy society, one characterized by educated citizens and/or opinions on any matters assigned by the Board.
who in turn sustain strong families and solid organizations: a
society in which a rising tide of progress raises all boats. The
Bank honors this goal through the efforts of both the Bank and
the SCB Foundation.
8 ANNUAL REPORT 2013
Outlook for 2014 This bleak economic landscape has led the Bank to rapidly adopt
tactical strategies to response to the difficult challenges in 2014.
Thailand’s political turmoil, which commenced in late 2013, This swift response will allow the Bank to maintain its competitive
and continues through to the date of this report, has further edge and continue to outperform the market. These tactical
dampened growth prospects for an already slowing Thai economy. thrusts in 2014 will be centered on four core themes:
The continued deadlock has negatively affected public investment,
• reduce the cost of deposits to bring it in line with the major
particularly the initiation of the infrastructure mega projects,
competitors;
business investment, consumer confidence, tourism arrivals in
the seasonal peak in the first quarter and, potentially, foreign • contain growth of operating expense;
direct investment. If the conflict remains unresolved over the next
few months, the outlook will deteriorate significantly. Assuming • grow the fee and insurance-premium income base; and
that the conflict will be resolved in the first half, Thailand’s
• accelerate the build-up of capabilities of key customer-
GDP growth in 2014 will be in the region of 2.4%.
facing personnel as the Bank further develops its wealth-
management franchise.
The only silver lining on the horizon is the improving global
economic outlook in the developed markets, which should lead to
As always, we wish to end by thanking all our shareholders and
export growth of about 5%. In addition, domestic spending should
customers for making SCB their Bank of Choice. Too, we place
show moderate growth driven by an accommodative monetary
on record the Board’s gratitude to the management and staff of
policy, moderate inflationary pressure, the recent cut in personal
the SCB Group for their passion and commitment toward making
income tax rates, and the sharp slowdown of household debt.
SCB Thailand’s best universal bank.
However, as the US Federal Reserve continues to taper its
quantitative easing program, medium-to-long-term interest
rates will no doubt rise, and Thailand might experience some
level of capital outflows from its bond market, with consequent
pressure on the Thai Baht as well as on most emerging market
currencies.
Mr. Anand Panyarachun Dr. Vichit Suraphongchai Mrs. Kannikar Chalitaporn
Chairman of the Board Chairman of the Executive Committee President
ANNUAL REPORT 2013 9