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Siam Commercial Bank Pcl, one of Southeast Asia’s largest lenders, has fallen out of favor with securities analysts after reporting fourth-quarter results that raised concerns about loan quality.

Nearly a third of the analysts who cover the Thai bank cut their recommendations the past week, helping erase nearly $2 billion from its market value.

Among the 18 lenders in Bloomberg’s Asean Banks Valuation Peers gauge, Siam Commercial’s consensus analysts’ rating has tumbled to 3.4 out of a maximum 5 points, the worst after Malaysia’s Public Bank Bhd.

As recently as Jan. 17, the consensus on Siam Commercial was 4.2, which ranked seventh, based on 29 ratings. Each “buy” recommendation counts as 5 points, with 3 points for “hold” and 1 point on “sell.”

Siam Commercial and other Thai lenders have closed branches while increasing digital banking in an effort to boost earnings. But a struggling economy has increased bad loans at the bank, which is more than a century old and counts King Maha Vajiralongkorn as its biggest shareholder.

“Thailand’s economy in 2020 is still surrounded by negative factors,” said Therdsak Thaveeteeratham, an analyst at Asia Plus Securities Co. “Asset quality is still at risk and needs to be watched closely.”

Siam Commercial’s shares posted their biggest one-day decline since 2008 on Jan. 20, the first trading day after the fourth-quarter earnings report showed a jump in bad-loan provisions. Asia Plus, Credit Suisse Group AG and JPMorgan Chase & Co. were among the brokerages that cut ratings.

READ: SCB’s Asset Quality Concerns, Downgrades May Be Overdone: React

Still, the downgrades and reaction may be overdone as Siam Commercial raised loan-loss provisions in 2019, said Diksha Gera, a Bloomberg Intelligence analyst. The bank may consider boosting the net interest margin and cut costs to counter weak revenue, she said.

“This should put the bank in good stead for 2020,” said Gera. “The bigger risk we see is potential M&A” following recent moves of other local competitors such as Bangkok Bank Pcl to make acquisitions, she said.

Bangkok Bank last month announced that it would acquire a controlling stake in Indonesia’s PT Bank Permata for about $2.7 billion to expand its presence in Southeast Asia’s biggest economy.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net;Lee Miller in Bangkok at lmiller@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Marcus Wright

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