SC Thai to maintain robust capitalisation, but profitability volatile: expert

The bank is expected to receive support from its parent SC in case of times of need

Standard Chartered Bank Thailand (SCBT) is expected to maintain its robust capitalisation and a highly liquid balance sheet in 2024, according to a report by Moody’s Investors Service.

The bank is expected to receive support from its parent Standard Chartered in case of times of need, contributing to its resilience.

“The credit quality of SCBT's balance sheet will remain strong over the next 12-18 months, underpinned by its focus on large institutional clients and de-risking efforts since 2018,” the ratings agency wrote in its latest ratings commentary on SCBT, adding that less than 0.5% of the bank’s total credit exposure was impaired as of 30 June 2023.

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However, SCBT's institutional banking business exposes the bank to high single-party concentration risk, Moody’s said.

In addition, the bank is reportedly more exposed to market risk because of its focus on financial markets. Investments and derivative assets made up more than half of the bank’s total assets.

Profitability will also remain volatile as a result of SBCT’s focus on financial markets. The bank earns substantial trading income that is less predictable when compared to fees and net interest income. Moreover, SCBT's cost base is high because the bank lacks economies of scale in Thailand, Moody’s warned.

Despite these issues, capitalisation will still remain “very high” over the next 12 to 18 months.

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“The bank will continue to maintain a large capital base to finance institutional clients without breaching the regulatory limit on single-party lending. It has also consistently maintained a tangible common equity to risk-weighted assets ratio at around 30% over the past five years,” Moody’s said.

SCBT's liquid assets as a percentage of total tangible assets are expected to remain high at around 50% over the same period.

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