By NG MIN SHEN / Pic By MUHD AMIN NAHARUL
CIMB Group Holdings Bhd is eyeing 6% loan growth for its financial year ending Dec 31, 2019 (FY19), on expectations its Malaysian and Indonesian operations will register a sustained loan expansion.
“We’re forecasting loan growth for the whole group to be around 6% for 2019, driven mainly by Malaysia and Indonesia which we expect to grow around 6% to 7%. In Malaysia, we expect the industry to grow around 5%,” CIMB group CEO Tengku Datuk Seri Zafrul Aziz said at a press briefing on the banking group’s FY18 results in Kuala Lumpur yesterday.
CIMB is expecting 2019 to be another stronger financial year barring unforeseen circumstances in other markets.
This is in light of the upcoming Thailand and Indonesian elections in March and April respectively, and the Philippines senate vote in May.
“We hope for a better year based on the forecast loan growth, and given that markets are expected to be better. Costs continue to be under control, provisions and asset quality numbers are quite good, we don’t see any problems there. So, hopefully, we can meet the target for a better year,” Tengku Zafrul said.
He expects capital market activity — which dragged pretax profit at the group’s wholesale banking division 31.7% lower year-on-year (YoY) to RM1.75 billion in FY18 — to recover somewhat this year.
“2018 was very slow and quiet — it’s a low base, so we’re telling our teams to have a bigger budget to achieve in 2019. We’re forecasting a better year for the capital markets this year,” he explained.
CIMB grew its loans by 7% YoY to RM343.8 billion in FY18, aided mainly by a 10.5% YoY expansion in loans in the home market.
The group’s Thailand, Singapore and Indonesian operations registered loan growth of 7.8%, 5.3% and 1.8% respectively, while other markets (Labuan, London, Cambodia, Vietnam, Hong Kong and Shanghai) saw a 2.6% decline.
Total deposits rose 6.3% YoY to RM379.6 billion. Gross impaired loan (GIL) ratio was at 2.9% as at end-2018 versus 3.4% in 2017.
For the fourth quarter ended Dec 31, 2018, the bank’s net profit increased 5.4% YoY to RM1.12 billion, largely due to improvements in the commercial banking segment and group funding.
Revenue was 9.7% lower YoY at RM4.07 billion as a result of a 31.6% decline in non-interest income (NII).
Net profit for FY18 climbed 24.8% YoY to RM5.58 billion as a result of its strong consumer and commercial banking businesses, as well as a 5.2% dip in operating expenses and 35.8% decline in loan loss provisions.
The group benefitted from a RM163 million gain arising from the sale of 50% interest in CIMB Securities International Pte Ltd to China Galaxy Securities Co Ltd in January last year.
Revenue for the year was 1.4% YoY weaker at RM17.38 billion due to a 16% YoY fall in NII from weaker capital markets in Malaysia and compression of net interest margin (NIM) in Indonesia.
The group has proposed a second interim dividend of 12 sen per share, resulting in a 50.8% payout ratio declared for FY18.
The group’s NIM, which fell to 2.5% in FY18 from 2.63% in FY17 on the contraction at its Indonesian operations, is likely to stay “relatively flat” this year despite several other banks guiding for NIM compression.
Tengku Zafrul attributed this to the lender’s operations overseas such as in Indonesia and Thailand, where it foresees improvement in NIM.
“We do expect some NIM compression for our Malaysian business — around five basis points, given the liquidity in our country — but looking at our overall group NIM, which includes other countries, it should be flat,” he said.
The group is expected to reveal a new five-year transformational plan tentatively dubbed “Forward 23” within the next two weeks, following the completion of its four-year strategic plan, Target 2018 or T18.