CIMB slashes loan growth target for 2H

by S BIRRUNTHA / pic by BLOOMBERG 

CIMB Group Holdings Bhd has lowered its loan growth guidance to 2% to 3% for the second half of the year (2H21) and expects provision levels to remain elevated, coupled with higher modification loss.

Group CEO Datuk Abdul Rahman Ahmad said the bank continues to provide repayment assistance to affected borrowers such as the existing payment assistance programme, in line with the People’s Protection and Economic Recovery Package (Pemulih).

He said the lower loan target was made after considering the surge in Covid-19 cases due to the Delta variant, which has added uncertainty to the regional economies’ opening and economic recovery outlook.

He said the group remains cautious due to the potential downside risks in 2H21 despite a solid performance in the 1H.

“Our focused investments under our Forward23+ strategic plan are progressing well, particularly in the areas of cost rationalisation and wealth management.

“With more than 50% of banking transactions now being carried out online, we have strengthened our digital proposition and will continue to invest in technology to enhance customer experience,” Abdul Rahman said at a virtual financial results briefing on Monday.

He said CIMB Islamic remains a key focus as the group strengthens its leading position through an Islamic-first approach to developing products and solutions.

For 1H21, CIMB recorded a strong net profit of RM3.54 billion from RM785 million net profit a year ago.

Revenue for 1H21 increased by 32.7% to RM10.63 billion from RM8.01 billion.

Overall, the group stated that the improved performance was driven by higher operating income, strong cost containment and significantly lower provisions compared to the lower base results in 1H20, which were affected due to the economic disruption of Covid-19.

“Reported 1H21 net profit of RM3.54 billion, which includes exceptional items, primarily due to the one-off revaluation gain of RM1.16 billion from the deconsolidation of TNG Digital Sdn Bhd in the first quarter ended March 31, 2021 (1Q21).

“This was partially offset by RM258 million mainly related to the write-off and accelerated amortisation of intangible assets in 2Q21,” it noted.

CIMB’s gross loans contracted marginally 0.2% year-on-year (YoY), largely due to the challenging pandemic-affected environment and business recalibration in selected key markets as it reshaped its portfolio in line with its

Forward23+ strategic plan. Group’s total deposits slightly increased 0.3% YoY, whilst current account and savings account (CASA) continued to grow strongly at 8.7% YoY, with the CASA ratio reaching 41.6% as at June 2021.

CIMB’s net profit jumped by almost four times to RM1.08 billion for 2Q21, compared to RM277.08 million a year ago.

Revenue for the quarter climbed 20.8% to RM4.67 billion from RM3.87 billion previously on the back of stronger operating income and lower provisions.

The group’s earnings per share for the period surged 287% to 10.80 sen from 2.79 previously, according to an exchange filing today.

The group has proposed a first interim dividend of 10.44 sen per share this year, or a 40% payout ratio based on core net profit in line with the group’s dividend policy.

Abdul Rahman said, despite some tapering of the topline growth in 2Q21 due to the resurgence of the pandemic across the region, the group benefited from positive earnings recovery in 1H21 after taking into account the low base effect from a year ago, driven by improvement in net interest margin, continued cost focus and lower provisions across the group.

At the same time, CIMB’s digital businesses continue to build momentum.

TNG Digital’s registered users increased to 16.1 million, adding 600,000 users in 2Q21.

GO+, the investment offering available in the Touch ‘n Go eWallet, has also reached 1.2 million investors within three months, with total assets under management of RM112 million as at June 2021.

Similarly, Abdul Rahman said CIMB Philippines reached 3.9 million customers and a deposit book of RM1.10 billion, with 400,000 customers added in 2Q21.