SCB Surpasses Expectations with Strong Q2 Performance
Leading financial analysts have shared overwhelmingly positive assessments of SCB’s strong second-quarter 2025 earnings, which significantly surpassed market expectations. The commentary from prominent firms like DBS, CLSA, and Morgan Stanley collectively highlights the bank’s robust performance, which was driven by a stronger-than-anticipated non-interest income, improved asset quality, and highly effective cost control measures. SCB’s earnings reached a impressive 12.8 billion baht for the quarter, representing a substantial year-on-year increase of 27.7% and a quarter-on-quarter rise of 2.3%. This performance notably exceeded expectations by 18%. In response, DBS has upgraded its rating on SCB to a “BUY” and set a higher target price of 135 baht, indicating a belief that it is “not too late to ride the upside” of the bank’s positive momentum.
Strategic Focus on Profitability and Shareholder Returns
Despite ongoing macroeconomic uncertainties, SCB’s management has reaffirmed its commitment to achieving a double-digit Return on Equity (ROE) by 2027. This ambitious long-term goal is a key factor supporting the bank’s objective of maintaining a high dividend payout ratio of 80%, which analysts expect to be sustained in the near term. To mitigate risks in the current environment, the bank is taking a proactive and cautious approach. CLSA noted that management added 900 million baht in overlays during the quarter, a strategic measure taken in anticipation of “ongoing uncertainty on US tariff outcomes.” This cautious stance is further evidenced by the bank’s decision to de-prioritize loan growth, which was down 2% year-on-year, a point highlighted by analysts at Morgan Stanley, who see cost control as a primary operational focus.
Navigating Challenges and Maintaining a Stable Outlook
While the overall Q2 results were strong, the detailed analyst reports from Morgan Stanley noted some nuanced challenges. The bank’s Net Interest Margin (NIM) experienced an 8-basis-point contraction quarter-on-quarter, primarily due to lower interest rates, with a risk that the full-year NIM could fall slightly below its 3.6% target. Fee income also showed some softness, though this was largely offset by strong performance from wealth management services and mark-to-market gains from SCB10X. On the credit front, Morgan Stanley did note a deterioration in auto loan quality, but overall credit cost stood at 164 basis points, which remains well within SCB’s target range of 150–170 basis points. Despite these challenges, management has stated that the bank’s 2025 targets remain unchanged, and they are confident in maintaining the 80% dividend payout ratio, signaling a stable and confident outlook.
