SCB eyes very small firms

Siam Commercial Bank (SCB) plans to expand the number of its small business customers with a focus on the food supply chain and e-commerce operators this year.

The two sectors have a promising outlook, said Pikun Srimahunt, SCB first executive vice-president, adding that a selective approach for clients is essential to its strategy of limiting risks amid rising non-performing loans (NPLs) for small and medium-sized enterprises (SMEs).

“Typically, this customer segment’s financial position is not very strong. A liquidity crunch is a risk factor with a fragile economy. The bank needs to closely monitor these clients this year to control asset quality while expanding loans,” she said.

SME operators are the most vulnerable to the country’s subpar growth and tepid domestic consumption for an extended period. The Bank of Thailand reported SME loans that turned sour climbed to 4.35% of loans outstanding at the end of December, up from 3.5% from the same period a year before.

Mrs Pikun said the bank sees vast room for very small (S-SME) business growth, however.

SCB defines S-SMEs as companies with annual sales of below 75 million baht. It has extended loans to 50,000 S-SME customers, with loans averaging 1 million baht per client.

There are around 4 million S-SMEs in Thailand and 400,000 of them have registered with the Commerce Ministry.

SCB, the country’s third-largest bank by assets, aims for S-SME loans to grow at the same level as its total lending growth target, which is 4-6% this year. Bank branches are to be the key channel to facilitate the loan expansion, she said.

Amid the uneven economic rebound, SCB offers several debt restructuring options to help S-SME customers survive. Around 80% of the S-SME customer base is self-employed workers.

SCB’s bad loan ratio for the S-SME segment is expected to move up a tick this year in line with loan growth and the country’s economic circumstance, she said.

The bank’s bad S-SME loan ratio stood at 4.7% of the segment’s loans outstanding at the end of last year.

SCB aims to keep its gross NPL ratio at 3% or below this year. The bank’s gross NPLs were at 2.67% of total loans at the end of 2016 and S-SMEs were the major contributor to distressed loans.

SCB shares closed on Friday on the SET at 154 baht, unchanged, in trade worth 947 million baht.