Analysts Downgrade Thailand’s Oldest Banks

Siam Commercial Bank, one of Southeast Asia’s largest lenders, has prompted cuts from analysts on concerns of its loan book.

After the bank reported its fourth-quarter results, nearly a third of the analysts who cover the Thai bank cut their recommendations the past week, wiping out nearly $2 billion from its market value. Asia Plus, Credit Suisse and J.P. Morgan Chase were among the brokerages that cut ratings.

Thailand’s economy in 2020 is still surrounded by negative factors. Asset quality is still at risk and needs to be watched closely. said Therdsak Thaveeteeratham, an analyst at Asia Plus Securities.

Siam Commercial and other Thai lenders have closed branches while increasing digital banking in an effort to boost earnings. However, a struggling economy has increased bad loans at the bank, which is more than a century old and counts King Maha Vajiralongkorn as its biggest shareholder.

Siam Commercial’s shares posted their biggest one-day decline since 2008 on January 20, the first trading day after the fourth-quarter earnings report showed a jump in bad-loan provisions.

Still, the downgrades and reaction may be overdone as Siam Commercial raised loan-loss provisions in 2019, according to Diksha Gera, a Bloomberg Intelligence analyst. The bank may consider boosting the net interest margin and cut costs to counter weak revenue, she said.

The bigger risk we see is potential M&A following recent moves of other local competitors such as Bangkok Bank to make acquisitions, she notes.

Bangkok Bank last month announced that it would acquire a controlling stake in Indonesia’s PT Bank Permata for about $2.7 billion to expand its presence in Southeast Asia’s biggest economy.a