UBS has upgraded SCB X (SCB) to “Buy” from “Neutral” and raised its 12-month price target to THB 165.00 from THB 152.00, citing discounted valuations versus peers, stronger 2027 earnings, more excess capital returns after Basel IV and long-term value from potential industry consolidation.
UBS raised its 2027 and 2028 earnings per share (EPS) forecasts by 2% and 5% respectively, on lower credit costs. Its 2027 EPS estimate is now THB 14.00 (from THB 13.70), and its 2028 estimate is THB 14.63 (from THB 13.99). The 2026 forecast is unchanged at THB 12.74. The brokerage expects a profit recovery from 2027 as the clean-up of non-performing loans (NPLs) advances.
Credit costs rose quarter-on-quarter from 150 basis points to 159 basis points in the second quarter of 2026, driven by SCB’s Gen-2 businesses and the resolution of Gen-1 NPLs. UBS expects this trend to continue in the second half of 2026 before improving in 2027. It cut its 2027-28 credit cost estimates to 155-160 basis points from 165 basis points.
For Gen-1, UBS noted that SCB’s above-peer accrued interest receivables may reflect restructured loans or higher housing loan exposure. If SCB sets up a joint venture asset management company (JVAMC) and moves more retail and SME loans off its balance sheet, accrued net interest income and credit costs could fall structurally, as seen at KBANK.
For Gen-2, UBS expects credit quality and credit costs at Auto X to stabilize by mid-2027.
SCB’s strong wealth and mortgage platform could also bolster scale efficiencies from industry consolidation, supporting its long-term return on equity (ROE) and dividend upside. UBS said SCB and KTB offer the most attractive balance of profits, loan loss reserves and capital strength among the Thai banks it covers.
At the Thailand Focus conference, Thai banks including SCB suggested that the impact of Basel IV may be lower than previously estimated. UBS believes the impact could even be net positive for SCB. Key drivers are revised rules on unused credit lines and/or Bank of Thailand approval of Basel IV models.
UBS also believes further NPL sales and JVAMC formation could reduce risk-weighted assets and support dividends. It maintains an 80% payout ratio for 2026-27 and raises its 2028-30 average to 75% from 72%, with a medium-term Tier 1 ratio above 17%. At an 80% medium-term payout, UBS said fair value would rise to THB 172, with the Tier 1 ratio at 17.1-17.4%.
The THB 165 target price is up THB 13 from the previous THB 152, with UBS attributing 6% of the increase to earnings revisions and 3% to Basel IV and payout changes. It equates to 11.8 times 12-month forward price-to-earnings (from 11.0 times), based on a sustainable payout ratio of 77% (from 75%), a 9.5% cost of equity and 3% growth.
UBS added that SCB still trades at a discount to KTB. It sees potential upside as SCB’s earnings normalize and capital efficiency improves.
