CIMB’s profit shrinks due to transformational costs


CIMB Group Holdings Bhd recorded a 24% decline in its net profit for the fourth quarter ended Dec 31, 2019 (4Q19) to RM848.64 million from RM1.12 billion posted in the same period last year due to one-off actions.

The banking group incurred transformational costs amounting to RM643 million last year, but made a gain from the partial sales of CIMB-Principal Asset Management Bhd and CIMB-Principal Islamic Asset Management Sdn Bhd in financial year 2018 (FY18).

Revenue for the quarter increased 11.7% year-on-year (YoY) to RM4.52 billion with earnings per share (EPS) dropping to 8.56 sen in 4Q19 from 11.67 sen in 4Q18.

CIMB declared a second interim net dividend of 12 sen per share, making the total dividend payout for FY19 to 26 sen or RM2.55 billion, translating to a higher dividend payout ratio of 56% versus 25 sen or 42% in FY18.

In FY19, CIMB’s full-year earnings fell 18.3% YoY to RM4.56 billion or 46.98 sen EPS, while revenue increased 2.4% YoY to RM17.8 billion.

The financial group said its underlying performance remained strong in FY19 excluding the one-off items, with a profit before tax of RM6.62 billion, representing a 5.5% growth YoY, while operating income grew 8.2% to RM17.8 billion underpinned by growth in net interest income (NII) and non-interest income (NOII).

NII grew 6.3% YoY to RM12.66 billion on the back of a 6.7% growth in loans, while the 12.9% improvement in NOII to RM5.14 billion was due to improved capital market activity.

Its net interest margin (NIM) stood at 2.46% in 2019 compared to 2.5% in 2018 with some compression in Malaysia and Thailand, partially offset by improvement in its Indonesian business.

Group CEO Tengku Datuk Seri Zafrul Abdul Aziz (picture) said the group targets a loan growth of 6% this year, supported by the consumer, and small and medium enterprises (SMEs) segments.

Loan growth for Indonesia is expected to be between 6% and 8%, while Singapore and Thailand are expected to see a loan growth of between 5% and 10%.

“We expect the RM20 billion stimulus package will add 0.5% growth to GDP this year, and for Malaysia’s GDP to grow between 3.6% and 3.7%,” he told reporters at CIMB’s financial results media briefing in Kuala Lumpur last Friday.

CIMB’s non-performing loan stood at 3.1% against the local sector average of 2.1%.

Tengku Zafrul added that the banking industry will face a challenging year in 2020 “coupled with the Covid-19” outbreak.

The impact on the group from the virus outbreak is limited, about 2% to 3% of the bank’s portfolio, he added, given the size of the bank’s exposure to sectors that are most impacted by the virus such as tourism, and food and beverage.

“We have reassured our customers that all cases will be given due consideration. We will continue to monitor the situation closely to ensure the impact on our asset quality is contained,” added Tengku Zafrul.