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SCB aims for 45% cost-to-income ratio

Mr Arthid says SCB will gradually close more branches. PORNPROM SATRABHAYA

Siam Commercial Bank (SCB) expects digitisation will help the bank reduce its cost-to-income ratio from the second quarter, putting the full-year figure at 45%.

The bank's cost-to-income ratio is estimated to be steady at a peak of 47% for the first quarter this year from the final quarter of last year, before gradually declining starting in the second quarter of 2019, said newly appointed co-president Arak Sutivong.

Digital banking migration under the first phase of the SCB Transformation programme launched in 2016 is a key factor pushing up the cost-to-income ratio.

SCB, the country's largest lender by assets, set a technology investment budget of 40 billion baht under its transformation project running through 2020. Of the total budget, 70% was spent over the past three years and the level will reach 90% this year.

SCB's cost-to-income ratio climbed by 2.8 percentage points to 47.7% in the fourth quarter and 4.5 percentage points to 46.8% in 2018.

The bank's net profit fell 7.1% to 40.1 billion baht last year due to expenses related to SCB's transformation scheme, a decline in non-interest income and higher loan-loss provisions.

Co-president Orapong Thien-Ngern said customer acquisition via the traditional channel is a key operating cost averaging at around 60% of a financial product's total expenses and the cost has fallen significantly on the digital platform.

Digital lending is a core business area that lowers the bank's operating expenses and generates new income in the longer term.

The bank rolled out a digital lending platform last year and targeted new loans of 10 billion baht, half of which it already extended, for the new channel.

"Although we can't see the shore now, we need to go digital amid the digital age," he said.

In Thailand, mobile banking penetration set a world record at 74%, compared with the global average of 41%.

Chief executive Arthid Nanthawithaya said the bank would gradually close brick-and-mortar branches from the existing 1,017 outlets, but how many branches will be shut down further depends on the pace of digital adoption and changing customer lifestyles.

Staff will be reduced accordingly, but the bank has no policy for lay-offs, he said. Around 3,000 employees resigned and retired last year.

It has 27,000 employees nationwide.

In 2019, the bank kicked off the second phase of SCB Transformation, focusing on restructuring to an agile organisation.

Appointing four co-presidents is a part of the transformation and it would take one year to see a clearer revamped organisation, he said. Apart from Mr Arak and Mr Orapong, the other presidents are Sarut Ruttanaporn and Apiphan Charoenanusorn.

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