CIMB’s 1Q net profit rises to 5-year high

CIMB remains optimistic and is confident of achieving its T18 targets by the end of 2018


CIMB Group Holdings Bhd noted prudent cost measures, gain on disposal and lower provisions helped it post an 11% year-on-year (YoY) increase in net profit to RM1.31 billion in its first quarter ended March 31, 2018 (1Q18).

The quarterly net profit is the highest in the last five years and translates into a net earnings per share (EPS) of 14.2 sen and an annualised return on average equity of 10.2%.

According to Bloomberg data, CIMB’s net profit climb beat analysts’ expectations by 48.9%.

Consensus’ 1Q18 net profit estimation on the country’s second-largest lender by assets was at RM877 million.

CIMB group CEO Tengku Datuk Seri Zafrul Aziz said the high net profit was achieved on the back of sustained cost discipline, lower provisions and a RM152 million gain from the disposal of 50% of CIMB Securities International Pte Ltd (CSI).

“Commercial banking’s recalibration was progressing well, while the wholesale banking business tracked weaker capital markets in 1Q18,” he said in a statement yesterday.

Tengku Zafrul added that consumer banking had a great start, posting a 51.2% YoY pretax profit growth.

The banking group’s cost-to-income ratio improved 49.8%, below its 50% year-end target, as operating expenses remained under control across all segments.

Total gross loans (excluding the bad loans) rose 0.5% YoY (5.3% excluding foreign-exchange (forex) effects), while total deposits rose 2.7% YoY.

Its loan-to-deposit ratio stood at 89.7% compared to 91.7% recorded in 1Q17.

The group’s gross impairment ratio stood at 3.2% as at end-March 2018, with an allowance coverage of 105.3%.

Net interest margin (NIM), however, went down 2.57% attributed to NIM contraction at PT Bank CIMB Niaga Tbk.

The group’s total capital ratio stood at 16.4% as at end-March 2018, while the Common Equity Tier 1 capital ratio stood at 11.7%.

In a filing to the local bourse, CIMB noted that its operating income was 1.3% lower YoY at RM4.3 billion due to a 3.5% decline in net interest income along with the deconsolidation of CSI.

The group’s consumer bank pretax profit rose 51.2% YoY to RM848 million in 1Q18, making up 49% of group’s pretax profit.

Consumer revenue growth was driven by a robust non-interest income performance, with net interest income growing steadily and costs remaining well managed.

The commercial-banking pretax profit went down 14.1% YoY in line with the regional business recalibration with the lower revenue partially offset by a decline in costs and provisions.

Pretax profit at the group’s whole-sale banking division was RM490 million, or 32.6%, lower YoY largely due to the comparatively weaker capital market activity in 1Q18.

CIMB added that its non-Malaysia pretax profit contribution declined 31% in 1Q18 compared to 34% in 1Q17.

Its Indonesian operation’s pretax profit dropped 6.5% YoY to RM273 million.

“However, excluding forex translation effects, Indonesia’s pretax profit expanded 7.7% YoY in line with CIMB Niaga’s improved performance,” it said.

Thailand’s pretax profit contribution of RM108 million was a 5.9% YoY increase attributed to lower provisions.

Total pretax profit contribution from Singapore was 10.9% lower YoY at RM122 million from weaker treasury and markets.

CIMB’s outlook for the rest of 2018 remains optimistic and the group is confident of achieving its T18 targets by the end of 2018.

Tengku Zafrul said plans to complete CIMB’s presence in all 10 Asean countries are well on track, with the digital banking launch in Vietnam and the opening of its first branch in the Philippines in the offing.

“We expect continued growth momentum in Malaysia with further improvement in loan growth and asset quality across Indonesia, Thailand and Singapore.

“We are currently working on our next mid-term growth plan which will be strongly premised on, among others, digital, innovation and sustainability,” he noted.

The group share price fell 16 sen, or 2.64%, to RM5.90 yesterday as investors sold down the market on negative news-flow with the FTSE Bursa Malaysia Kuala Lumpur Composite Index falling some 56 points, or 3.18%, to 1,719 points at close.