CIMB 1Q earnings down 42% 

by S BIRRUNTHA / pic by TMR

CIMB Group Holdings Bhd’s net profit for the first quarter ended March 31, 2022 (1Q22) fell 41.93% year-on-year (YoY) to RM1.43 billion dragged by one-off non-recurring items booked a year ago and the impact of Cukai Makmur.

The banking group stated CIMB group’s operating income and net profit declined by 19.8% and 41.9% year-on-year (YoY) to RM4.74 billion and RM1.43 billion respectively.

“The contraction was mainly due to the revaluation gain of RM1.16 billion on the deconsolidation of TNG Digital Sdn Bhd in 1Q21, as well as the impact of Cukai Makmur in 1Q22,” according to the group’s filing to Bursa Malaysia yesterday.

Quarterly revenue declined 19.84% YoY to RM4.74 billion, while earnings per share (EPS) amounted to 13.96 sen. No dividend was declared for the quarter.

According to CIMB, excluding the one-off items, the group sustained its core pre-provisioning operating profit at RM2.51 billion while core net profit grew by 16% YoY to RM1.55 billion. 

This translates to a core annualised return on average equity (ROE) of 10.5% and core EPS of 15.2 sen.

Core operating income for 1Q22 was flat YoY but grew 2.9% quarter-on-quarter (QoQ) to RM4.74 billion. 

Net interest income grew by 3.8% YoY to RM3.55 billion, despite a marginally lower net interest margin of 2.45% mainly due to the group’s Indonesia business. 

CIMB’s core non-interest income declined by 10.9% YoY to RM1.19 billion due to weaker global investment environment.

CIMB added that loan growth regained momentum, increasing by 4.9% YoY on the back of the economic recovery which benefited most of its markets and segments, especially consumer banking where loans grew 6.9% YoY.

Deposits increased by 7% driven by strong current account savings account (CASA) growth of 9.9% YoY, which translates to an improvement in CASA ratio from 42.3% recorded in March 2021 to 43.5% in March 2022. 

The group’s capital position remains strong and above target with its Common Equity Tier 1 ratio at 14.5% as at March 22, up from 12.9% as at March 21, and 14.5% as at December 2021.

CIMB’s cost-to-income ratio improved to 47% compared to 51.6% in 4Q21 and 47.2% in 1Q21, as core operating expenses decreased by 0.8% YoY from continued stringent cost controls.

Total provisions also declined significantly by 43.9% YoY from RM756 million recorded in 1Q21 to RM424 million in 1Q22 due to improved asset quality on the back of positive migration of customers from repayment assistance programmes, as well as writebacks from the recovery of legacy credits.

CIMB Group CEO Datuk Abdul Rahman Ahmad said the steady top line growth, sustained cost controls and reduction in provisions contributed to improved profitability despite the challenging investment environment.

“Our capital and liquidity positions and asset quality continue to strengthen, demonstrating the strength and resilience of our business franchise amid the current operating environment.

“We are particularly encouraged to see the positive traction in loan growth as the strategy to reshape our portfolio is starting to bear results,” he noted in a statement yesterday.

Abdul Rahman said the ongoing cost optimisation efforts have contributed to lower operating expenses and improvement in cost income ratio, notwithstanding higher expenses related to technology and operational investments. 

CIMB expects to spend RM1 billion in FY22 to drive further digitalization, as well as improve technology and operational resiliency.

The group is optimistic of an improved financial performance in 2022 in view of business expansion on the back of anticipated regional economic recovery.

“We continue to stay on course with our Forward23+ strategic plan to strengthen our position to be the leading focused Asean bank, as we build on the positive momentum of asset growth, contain cost escalation and improve asset quality to deliver sustainable financial returns,” he added.

CIMB shares were up eight sen to RM5.23 at press time.