Siam Commercial Bank (SCBTB) has been a sound and profitable bank. It has a focus on the retail segment and targets to increase margins by growing its non-traditional banking businesses. It announced a major business overhaul in September 2021 to establish a new parent company called SCB X to segregate the group’s core banking services (Gen 1) from its new fintech and digital businesses and to enable greater flexibility and independence.

Recent credit costs however have been elevated due to the riskier exposure that these entail. However, profitability remains healthy and the capital buffer is strong at both the Holdco (SCB X) and Bank (SCB) level.

We see a significant impact to the Thai economy from potential US tariffs, with ripple effects in the form of lower bank NIMs and higher credit costs than earlier guided for this year. Moody’s and Fitch have also downgraded their rating outlook on the Thailand sovereign (and consequently the Thai banks including KTB at Moody’s, which it currently rates in line with the sovereign) to negative in April and September 2025 respectively on increased risks to Thailand’s economic and fiscal strength.

The group’s business overhaul and strategic focus on retail comes with higher credit costs, particularly from the riskier target segments at the Gen 2/3 businesses. We expect a similar range for 2026 given challenges to the Thai economy including US tariffs, but SCB X’s higher NIM and low-40%s cost-income ratio provide comfortable room for that to be absorbed. We also take comfort in the ringfencing of the bank unit (SCB) from the Group’s riskier business units, and management’s minimum CET1 ratio of 16% at SCB.

Loan growth is likely to remain modest given a soft growth outlook for Thailand.