Siam Commercial Bank Public : Management Discussion and Analysis for 3Q2021

Press Release: October 21, 2021

SCB ANNOUNCED THIRD-QUARTER PROFIT OF BAHT 8.8 BILLION AND

NINE-MONTH PROFIT OF BAHT 27.7 BILLION

Bangkok: Siam Commercial Bank and its subsidiaries reported consolidated net profit of Baht 8.8 billion for 3Q21, a 90.0% yoy increase from higher operating profit and lower provisions. Pre-provision operating profit increased 12.6% yoy to Baht 21.1 billion driven by strong non-interest income growth and effective cost management. Net profit for the first nine months of 2021 was Baht 27.7 billion, up 24.6% yoy from the same period last year.

For the third quarter of 2021, net interest income declined 0.8% yoy to Baht 23.5 billion, reflecting the pressure on net interest margin in the current low interest rate environment and weak economic growth.

Non-interest income increased 24.3% yoy to Baht 13.4 billion. Strong income growth in bancassurance and wealth management businesses, a rebound in trade activities, and higher gain on sale of assets had contributed to this increase.

Expenses increased slightly 0.4% yoy to Baht 15.8 billion as the Bank continued its strict cost control measures. The Bank's cost-to-income ratio for the third quarter was 42.8%.

The Bank set provisions at Baht 10.0 billion in the third quarter and Baht 30.1 billion in total for the first nine months.

Non-performing loan (NPL) ratio went up slightly to 3.89% at the end of September 2021 from 3.79% at the end of June 2021. The Bank maintained a high NPL coverage ratio at 137.6% as well as a strong capital adequacy ratio at 18.4%.

Arthid Nanthawithaya, Chairman of the Executive Committee and CEO, commented:

"The Bank's steady growth despite the widespread impact of the COVID-19 pandemic reflected both our financial strength and our adaptability in this rapidly changing operating environment. We continue to focus on our critical role in helping our

customers and society through our relief programs. In the third quarter, the Bank launched a comprehensive debt restructuring program following the Bank of Thailand's

framework to help customers recover from this crisis in a sustainable fashion. Moreover, the Bank also channeled additional assistance to consumers and SMEs

through its food deliver platform, Robinhood. The Bank saw over 1.9 million of new digital users in the recent quarter, most of which were from Robinhood's expanded

user base. The Bank is committed to enhancing and deepening digital engagement and customer experience across multiple platforms and beyond banking services."

SCB - Financial Highlight

Unit: Baht million	3Q21	% qoq	% yoy
Income	36,910	1.2%	7.0%
NII	23,533	0.2%	-0.8%
Non-NII	13,377	2.9%	24.3%
Operating Expenses	15,813	2.8%	0.4%
Pre-Provision Operating Profit	21,097	0.0%	12.6%
Expected credit loss	10,035	0.1%	-22.5%
Net Profit	8,818	0.0%	90.0%
Loans	2,279,016	-0.8%	5.0%
Total Assets	3,272,204	2.2%	1.5%
Deposits	2,410,172	1.7%	0.1%
ROE	8.3%	-0.1%	3.7%
ROA	1.1%	0.0%	0.5%
NIM on Earning Assets	3.02%	-0.02%	-0.10%
Cost to Income Ratio	42.8%	0.6%	-2.9%
Loan to Deposit Ratio	94.6%	-2.3%	4.4%
NPL%	3.89%	0.10%	0.57%
NPLs	107,071	2.8%	19.1%
Coverage Ratio (Total Allowance to NPLs)	137.6%	-4.7%	-8.1%
CAR	18.4%	0.5%	-0.3%
Regulatory Capital	413,909	2.9%	3.0%
Traditional Branches	797
Investment Centers	6
Business Centers	1
Foreign Exchange Kiosks	42
ATM Machines	9,085

(Consolidated)

9M21 % yoy

111,132 2.5%

70,384 -4.0%

40,748 16.0%

46,290 -4.1%

64,841 7.8%

30,071 -7.2%

27,720 24.6%

2,279,016 5.0%

3,272,204 1.5%

2,410,172 0.1%

8.8% 1.4%

1.1% 0.1%

2.98% -0.30%

41.7% -2.8%

94.6% 4.4%

3.89% 0.57%

107,071 19.1%

137.6% -8.1%

18.4% -0.3%

413,909 3.0%

797

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42

9,085

Management Discussion and Analysis

For the third quarter and first nine months ended September 30, 2021

IMPORTANT DISCLAIMER:

The information contained in this document has been obtained from several sources, and Siam Commercial Bank PCL (the "Bank") cannot confirm, in all cases, the accuracy and completeness of such data, particularly those sourced from outside the Bank. In addition, any forward looking statements are subject to change as market conditions and actual outcomes may differ from forecasts. The Bank makes no representation or warranty of any type whatsoever on the accuracy or completeness of the information contained herein. In addition, the information provided is preliminary and subject to change following the review of the financial results for the third quarter and first nine months ended September 30, 2021.

In the third quarter of 2021, the Bank continued to demonstrate performance resilience with significant growth in net profit, adequate coverage ratio, and a strong capital base despite the Thai economy being hard hit by the third wave of pandemic. The key drivers for operating growth remained to be wealth and bancassurance businesses coupled with cost control initiatives. The Bank is cautiously optimistic about asset quality based on the Bank's prudent approach throughout this crisis and the prospect of country reopening.

SCB has been proactively assisting affected customers in a variety of ways. The current focus is to work with customers in the relief program to identify and implement comprehensive debt restructuring solutions to ensure customers' long-term survival. Following the BOT's latest two-month payment holiday measure, the amount of relief loans rose qoq.

On September 22, 2021, the Bank announced a new vision to become the most admired financial technology group in ASEAN. To achieve this goal, SCBX was set up as the group's mothership to set the group's strategic direction and allocate resources to maximize shareholder value.

Operating performance

For the third quarter of 2021, the Bank reported an operating profit of Baht 21.1 billion, up 12.6% from the same period of last year driven by higher non-NII. The higher operating profit, combined with a lower provisions of Baht 10.0 biliion, led to an 90.0% increase in net profit to Baht 8.8 billion.

Non-NII for 3Q21 showed robust growth despite a prolonged soft lockdown throughout the country. The primary growth drivers were recurring income from wealth and bancassurance businesses and transactional banking activities as well as non-recurring items from mark-to-market gain from investments and gain on sale of written-off unsecured loans and non-performing assets.

Operating expenses in the third quarter of this year edged up marginally yoy and cost-to-income ratio stood at 42.8%. The Bank continues to manage its costs strictly.

Given the Bank's decision to focus on high quality loans since last year, loans grew by 1.1% on a year- to-date basis. Fierce market competition for quality customers and ample liquidity in the financial sector also contributed to this sluggish loan growth. The above factors and, to a limited extent, the impact from comprehensive debt restructuring resulted in a decline in NIM for the third quarter of this year to 3.02%.

Asset quality and impact from COVID-19

During the third wave of COVID-19, Thailand has experienced both high infection and hospitalization rates which have overwhelmed the healthcare system and caused a shortage in hospital beds. The daily infections peaked at 23,000 cases per day during mid-August and have come down to around 10,000 cases per day in early October.

The prolonged third wave prompted the government to impose a series of containment measures ranging from isolating identified clusters such as construction workers' camps to tightening restrictions in dark-red zones including Bangkok and its vicinity where business closure and night curfew were enforced. As infections ebbed, the government began to ease certain restrictions starting on September 1 by allowing partial reopening of some businesses, among others, shopping malls, fresh markets, domestic flights operating in and out of cities/provinces in dark-red zones. The government further lifted restrictions on October 1, such as shortening curfew hours in dark-red zone provinces, reopening schools that meet safety protocols, and allowing restaurants dine-in option before 9 pm.

In parallel with the government's effort, the BOT also issued several COVID-19relief measures in the third quarter of this year which included a two-monthdebt moratorium for SME and retail customers in dark-redzones starting in July. Additional measures were announced on August 20 to address liquidity preservation and new money for SME and retail customers. Reduction of FIDF fee from 46 bps to 23 bps per year was also extended for another year until the end of 2022. The BOT has also urged banks to work with customers on long-termdebt restructuring solutions and offered support by relaxing loan classification and provision requirements based on the extent of restructuring activity as announced on September 3 (see a summary of the BOT measures in the Appendix).

Throughout this crisis, helping customers has always been the Bank's key priority. Since 2Q20, the

Bank has provided Baht 839 billion of relief loans to over 1.2 million customers. Relief loans climbed in 3Q21 following the BOT's new two-month debt moratorium measure for SME and retail customers in dark-red zones to Baht 464 billion or 20% of total loans, up from 16% in the prior quarter. Note that this amount includes Baht 124 billion of two-month debt holiday which should exit the program by the end of this year. Despite prolonged COVID-19 outbreak and lockdown in 3Q21, payment profile remained at the acceptable level.

Comprehensive debt restructuring solutions

The Bank has been proactively working with customers on comprehensive debt restructuring solutions. The key objective is to migrate affected customers in the relief program towards long-term solutions to increase their business and personal financial survival. The Bank's approach is in line with the BOT's measures announced on September 3 which urged banks to help affected customers develop long- term debt restructuring plans tailored to each individual customer's repayment ability and recovery pattern. According to the BOT, customers can be classified into two groups based on the complexity of their restructuring arrangements: those requiring only term extension and those with more extensive restructuring conditions to reduce debt repayment burden.

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Based on each individual customer's operating circumstances (e.g. risk profile, projected cash-flows, industry/sector recovery trajectory), the Bank will offer a tailored solution that may include, among others, tenor extension, installment reprofiling, lower rates, step-up rates, etc. Furthermore, underwriting criteria may be lowered for certain cases when deemed necessary.

Customers who have undergone the comprehensive debt restructuring process will be closely monitored and are expected to recover at the same pace as, if not faster than, the country's overall recovery. According to the BOT measures, loans that have been restructured with extensive restructuring conditions to reduce debt repayment burden can be immediately reclassified to Stage 1 if they are non-NPLs prior to the restructuring; or can be reclassified to Stage 1 if they are NPLs but can perform according to the new terms for three consecutive months or three periods, whichever is longer. The Bank will follow the BOT guidelines on loan classification but will not fully leverage the relaxation.

The Bank aims to undertake comprehensive debt restructuring in the approximate amount of Baht 500 billion. The Bank expects that 50% of total comprehensive program can be completed by the end of this year. The lower expectation than initial forecast was due to some customers being able to service debt with their current payment schemes, difficulties in preparing and executing new contracts during the lockdown period, and the extension of the regulatory timeline to 2023.

The Bank's NPL ratio at the end of the third quarter increased slightly qoq to 3.89%. The Bank had

prudently maintained a high level of provision at 175 bps in 3Q21. The Bank's coverage ratio remained high at 138%.

New strategic direction

Amid the rapidly changing consumer behaviours and environment, the success of an organization hinges on its agility and flexibility to grow new businesses. A new vision has been set to be "the most

admired financial technology group in ASEAN."

To achieve this vision, SCBX, the new mothership, has been established to lead the strategic initiative to redeploy capital for value unlocking. The new group structure is designed to grant full autonomy to each subsidiary to drive their own business model, optimize their unique risk-return profile, attract new talents, and ultimately achieve superior shareholders' return. After obtaining shareholders' and regulatory approval, SCBX will make a tender offer to the Bank's shareholders in a 1-for-1 share swap. Note that SCBX will cancel this tender offer along with the reorganization plan if the share conversion rate turns out to be below 90%.

If and when the share swap is completed and SCBX becomes the Bank's parent company, the Bank will then transfer Baht 70 billion to SCBX as a one-off dividend payment. Part of this payment will be used to fund related business transfers as part of the reorganization. Specifically, unsecured lending business and some selected companies under SCB Bank will be transferred to SCBX. The remaining amount will be kept at SCBX to pay for business operations including new investments and future dividends.

Full details of the business restructuring are in the SET filing dated September 22, 2021.

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