Redesign intensifies competition

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The restructuring of Siam Commercial Bank (SCB) could intensify competition in the lending business and cause competitors to expand at a slower-than-expected pace, analysts at KTBST Securities said.

SCB announced last week the creation of five new companies and the transition of its existing activities under SCB X Plc, a new holding company, with the aim of becoming a regional fintech conglomerate by 2025.

According to KTBST, the overhaul will allow SCB to become a leading player in the lending industry and increase competition among lenders.

The lending branches of SCB X will have access to cheaper loans from SCB while other companies in the sector will have to bear the high cost of raising funds through various instruments such as bonds.

“We believe the restructuring will be a negative factor for existing lenders, including personal loan, leasing and leasing service providers, as it will indirectly affect their businesses and may result in lower loan growth. than expected, “KTBST said.

The future loan subsidiaries of SCB X have grown exponentially in recent years, thanks to faster operations following their separation from SCB, which faces stricter regulations from the Bank of Thailand.

Once all the subsidiaries have moved to SCB X, these companies will have greater borrowing capacity to develop their activities, which will allow them to lend more at competitive interest rates.

They will also benefit from data support and in-depth analysis from Data X, one of SCB X’s new growth activities, which aims to help improve the operational efficiency of subsidiaries.

With end-to-end support and synergy in place, KTBST said SCB X subsidiaries would benefit from greater flexibility and growth potential and disrupt the operations of other companies in the same industry.

Card X, a new, separate subsidiary of the bank that will specifically oversee credit card and personal loan services, will affect Aeon Thana Sinsap (AEONTS) and Krungthai Card Plc (KTC).

Auto X, a subsidiary specializing in motorcycle and car loans in which SCB has expertise, will affect Muangthai Capital (MTC), Amanah Leasing (AMANAH), Ngern Tid Lor (TIDLOR) and Srisawad Corporation (SAWAD).

Alpha X, which was formed as a joint venture with Millennium Group Corporation for the leasing of supercars and large motorcycles, will affect Ratchthani Leasing (THANI).

In the short term, KTBST said that every 1% decrease in affected loans will affect the net profits of AEONTS, MTC, AMANAH, TIDLOR, KTC, SAWAD and THANI in 2022.

In the long run, KTBST should still monitor the performance of Card X, Auto X and Alpha X and how they may affect the operations of other companies in the finance industry in terms of borrowing costs, price competition policies and customer acquisition channels.

KTBST has a neutral outlook for investing in financial stocks, as the 2021 performance is still under pressure from low loan yields.


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