PETALING JAYA: CIMB Group Holdings Bhd reduced its loan growth target for 2021, following the contraction of total loans in the first six months of the year and the anticipation of a more difficult outlook in the second half of the year.
Total loans are only expected to increase by 2% to 3% in FY2021 (FY21) from the previous target of 4% to 5%, according to CIMB Group CEO Datuk Abdul Rahman Ahmad.
During the period January to June 2021, CIMB’s gross loan decreased by 0.2% year-on-year (year-on-year).
This is largely due to the difficult environment affected by the pandemic and the recalibration of activities in some key markets, as CIMB reshaped its portfolio in line with its Forward23 + strategic plan.
Speaking in a virtual briefing yesterday, Abdul Rahman said the banking group remained “concerned and cautious” about potential downside risks in the second half (S2) of fiscal 21.
This was mainly due to the Covid-19 Delta variant, which added to the uncertainty surrounding the opening of regional economies and economic recovery.
“The extended lockdown is likely to cause impediments to operating revenue growth, coupled with the impact of the loss of payment assistance modification and high provisions,” he said.
CIMB Group CFO Khairul Rifaie, (pictured below) who also spoke at the briefing yesterday, said the banking group’s change loss in S2 could be greater than the amount recorded in S1 of the year.
However, on a year-on-year comparison, the change loss would be lower, he added.
This is because there were more borrowers under CIMB’s payment assistance program last year.
Currently, Abdul Rahman has pointed out that around 27% to 30% of CIMB Malaysia’s retail portfolio falls under the Payment Assistance Program in accordance with the Government’s Stimulus Program for People’s Welfare and Economic Recovery or Pemulih.
“This number is relatively higher than our Targeted Payment Assistance (TPA) program, but far lower than last year’s general loan moratorium.
“Under the previous moratorium on global loans, the percentage of borrowers who benefited was close to 85%.
“It’s dropped to around 15% under the TPA program and now, under Pemulih’s loan moratorium, it’s back to around 27%,” he said.
Abdul Rahman described the loan repayment assistance provided to borrowers in Malaysia as “broad hedging” to the financial assistance it provided in its other markets, namely Thailand and Indonesia.
“Their numbers (in Thailand and Indonesia) are significantly lower, around double-digit numbers or so,” he added.
By mid-August 2021, CIMB Malaysia had provided financial payment assistance to approximately 480,000 individuals, small and medium-sized businesses as well as merchant banking clients.
“This assistance has an approval rate of almost 100% and includes the current Payment Assistance Program, Targeted Assistance Program and Extended TPA Program offered to clients in 2020, but excludes the general moratorium in March 2020” , according to the banking group.
Yesterday, CIMB announced that it recorded an improvement in its profits in the second quarter (Q2) of FY21, thanks to higher operating income, tight cost control and lower provisions.
Net profit for the quarter ended June 30 nearly quadrupled to RM 1.08 billion from RM 277.08 million a year ago.
Revenue jumped nearly 21% year-on-year to RM 4.67 billion from RM 3.87 billion in the previous corresponding quarter.
For the quarter under review, the banking group declared a dividend of 10.44 sen per share.
Cumulatively, for the first six months of FY21, CIMB’s net profit has more than quadrupled to RM 3.54 billion from RM 785 million in the same period last year .
The latest half-year net profit included a significant net contribution of one-off items, primarily the one-time revaluation gain of RM 1.16 billion from the deconsolidation of TNG Digital reported earlier in the first quarter of FY21.
This was partially offset by RM258mil mainly related to the write-off and accelerated amortization of intangible assets in Q2.
“As a result, the reported net profit including exceptional items decreased quarter over quarter from RM 2.46 billion to RM 1.08 billion,” CIMB said.
The banking group’s revenues in the first half, on the other hand, grew 32.7% year-on-year to RM10.63 billion from RM8.01 billion annually.
CIMB said its basic operating income in the first half of the year reached 9.47 billion RM, up 18.3% from 8.01 billion RM in the first half of fiscal year 20.
Of this amount, net interest income increased 14.8% to RM 7.06 billion, largely due to improved net interest margins in Malaysia and Indonesia.
Non-core interest income strengthened 29.8% year-on-year to RM 2.42 billion, driven by stronger cash flow, markets and wealth management income despite slower momentum in 2Q21.
“The group’s cost-to-income ratio (CIR) improved to 47.5%, its lowest CIR on record, despite a 1.2% increase in operating expenses to RM 4.5 billion in 1H21.
“As a result, the group’s core pre-provision operating profit improved to RM 4.97 billion from RM 3.57 billion year-on-year.
“Total deposits edged up 0.3% yoy while current and savings accounts (CASA) continued to grow strongly at 8.7% yoy, with the CASA ratio reaching 41.6 % in June 2021, “CIMB said.
In terms of asset quality, CIMB said its capital remains strong, with the CET1 ratio further strengthening to 13.4% in June 2021 from 12.9% in March 2021.
The total capital ratio also strengthened from 0.3% to 17.4% as of June 2021. CIMB’s short-term liquidity ratio remained above 100% for all of the group’s banking entities.
At the same time, the gross bad loan ratio of the banking group remained unchanged at 3.4% in June 2021.
Looking ahead, Abdul Rahman said CIMB’s targeted investments under its Forward23 + strategic plan are progressing well, especially in the areas of cost rationalization and wealth management.
“With more than 50% of banking transactions now carried out online, we have strengthened our digital offering and will continue to invest in technology to improve the customer experience,” he added.