Throughout the year 2004, Thailand was beset with domestic and external problems, which included the avian flu epidemic, unrest in three southern provinces, increased fuel prices and finally, the unfortunate loss of lives and property damages sustained in the tsunami disaster. However, the Thai economy managed to expand at a rate of 6%, driven by exports and domestic private consumption, increased investment, production utilization at or near full capacity in many industrial sectors and government policy of continued investments in many utility projects.
Competition among Thai commercial banks in 2004 continued to be as intense as ever, in lending as well as in the introduction of new products and financial services. While the Financial Master Plan allowed commercial banks to introduce a wider range of products and financial services, the asset quality problem and economic uncertainty combined to require commercial banks to exercise extreme care in their operations. Excess liquidity in the system and low level of domestic interests were beneficial to investments and loan growth, leading to increased profit for commercial banks. Thai commercial bank system grew stronger; large commercial banks showed higher levels of profit, set aside reserves at levels higher than those required by the Bank of Thailand, managed to reduce their accumulated loss and announced dividends for their shareholders.
The past year was another success for Siam City Bank as it experienced growth and expansion in all businesses. The Bank is now in a stronger and better competitive position. Local and international customers' and investors' confidence in the Bank was evident in their almost full conversion of SCIB-C1 warrants into common shares, such that the Financial Institutions Development Fund's shareholding was reduced from 82.48% to 47.58% and the Bank changed its status from a state enterprise to a private commercial bank on November 25th 2004.
In 2004, the Bank earned a total net profit of Baht 6,367, or Baht 3.01 per share, or 75% over the total net profit of Baht 3,631 million or 1.72 per share in 2003. Return on equity (RoE) and return on assets (RoA) were 19.33% and 1.35% respectively, as compared to the 2003 return on equity of 10.75% and return on assets of 0.76%. Increase in profit was attributable to increased income and efficient control of costs and expenditure. Management of spread led to decrease of funding costs from the restructuring and expanding retail customer base while loan portfolio (excluding AMC Note) increased from Baht 152,583 million at the end of 2003 to Baht 211,214 million at the end of 2004, an increase of 38% while non-performing loans were kept at 3.29%, the lowest level in the Thai commercial bank system. Its reserve for bad debts at 68% was higher than the level required by the Bank of Thailand. Its tier-1 capital of 10.24% put the Bank in a very strong position and enabled it to be the first bank to pay an interim dividend on September 16th 2004 at 40% of net profit or 70 satang per share.
In addition to business expansion to increase revenue, and costs and expenditure control to manage profit, the Bank is fully aware of the importance of developments in other areas to strengthen its competitive capacity and improve its operational standards. The Bank strives to expand its line of products and services to realize its vision and strategy of becoming a leading universal bank. To satisfy customers' needs, its product line consists of those products offered by the Bank as well as those offered by its subsidiaries, such as life insurance, non-life insurance, securities trading, and mutual fund. Bank's branches have been transformed from were sale outlets to sale and customer relationship centers with the introduction of Customer Relationship Management system. Physical appearances of the branches have been modernized to offer a unique and modern venue where customers can transact their businesses. Sales and marketing management departments have been added to the organizational structure to support business expansion. Most importantly, the Bank attaches great importance on good corporate governance. The Bank's and its executives' adherence to good corporate governance policy earned the Bank a rating of "Good" with a total score of 7.5 by Thai Rating and Information Service.
In 2005, the Bank continues its mission and objective of quality growth, fair profit and reasonable return to shareholders. Attainment of the Bank's mission and objective will be made through: business expansion made in concomitance with increased efficiency in operations; close business cooperation with subsidiaries and affiliated companies; efficient management of assets and branch network; improvement of quality and service delivery procedure for prompt and efficient services; accelerated increase of staff skills and potentials to meet competition; development of information technology; prudent risk management in all areas; higher standards of internal audit; and encouragement of staff's adherence to good corporate governance, so that the Bank will continue to grow and realize its vision of a leading universal bank.
On behalf of the Board of Directors we would like to thank our shareholders, customers, investors, the press, other public and private organizations and the general public for their confidence in and its support of the Bank's businesses. We would also like to thank the Bank's employees for their dedication and continued contribution towards the Bank's success. The Board of Directors looks forward to the honor of your continued support.
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