Double-digit loan growth for CIMB, outperforms industry 6% average

Record revenue: Tengku Zafrul ( left) and CIMB Group chief financial officer Shahnaz Jammal posing with the financial results at the event. Tengku Zafrul says the revenue performance for FY16 is the best in the history of CIMB despite a trying business environment last year.

KUALA LUMPUR: CIMB Group Holdings Bhd saw its loan growth in Malaysia outperforming the industry average amid a year of record revenue for its financial year ended Dec 31, 2016.

“I am quite surprised at our loan growth in Malaysia. For our consumer segment to grow by close to 10% is considered a lot.

“It is still too early to tell whether it is a sign of recovery for the industry. Industry loan growth was at the mid-single-digit level in 2016 of around 5%-6%,” CIMB group chief executive Tengku Datuk Seri Zafrul Aziz told a press conference to announce its financial results here yesterday.

“There has been a mixture of reasons for this growth, as we have been more aggressive in our product offerings, and in credit cards, we also grew quite a lot.

“This is because of the way we use big data and digital banking as a platform to acquire customers. This helped the growth of our business, especially for the consumer business,” he added.

CIMB’s Malaysian loan growth grew by 10.5%. This performance was the highest compared with other countries in which CIMB has banking operations.

“I must commend the team for achieving this feat. The growth was driven by all three key sectors: consumer banking, wholesale and commercial. The segments grew by double-digits. Mortgages grew by 11.5%. The Malaysian consumer has always been steady,” Tengku Zafrul said.

As a group, CIMB recorded loan growth of 8.7% in FY16, while the loan growth target for FY17 is 7%.

For last year, CIMB saw its revenue coming in at a record RM16.07bil from RM15.39bil in the previous year, with net profit at RM3.56bil from RM2.85bil in FY15.

For its fourth-quarter performance, the third-largest banking group by asset size in Malaysia saw profit growing by 3.47% to RM854.39mil on the back of 6.68% higher revenue to RM4.31bil.

“Our revenue performance for FY16 is the best in the history of CIMB despite a trying business environment last year. Across the group, our overhead expenses increased by only 1% year-on-year (y-o-y), contributing to an encouraging cost-to-income (CTI) ratio,” Tengku Zafrul said.

The bank’s CTI ratio improved to 53.9% in FY16, dropping from 55.6% in the previous year. It was 51.7% in the fourth quarter of last year.

“We are on track for our T18 targets. We see the CTI ratio dropping to below 53% in FY17. If we can achieve 51.7% in the fourth quarter, we should be able to be around that region or better for the year,” he said.

Notable mentions included the consumer division in CIMB’s Thailand banking operations which recorded a turnaround.

“Ever since we acquired Thailand seven years ago, our consumer business has not recorded a profit, and last year was the first year we made a profit. So, there is a good turnaround story for our consumer business in Thailand.

“We have relooked our business proposition there by focusing on the affluent market and leveraging on technology for the mass market. We invest more in digital technology and partnerships with telcos like AIS and 7-Eleven.

“While we took a big hit in the fourth quarter in terms of provisions in Thailand, we expect this year to be better. Although Thailand is less than 5% of our group, it still has an impact when it comes to provisions,” he said.

Provisions in Thailand and Singapore had affected CIMB’s commercial banking performance in FY16.

While CIMB’s regional commercial banking revenues grew with costs staying relatively flat, its pre-tax profit for this cumulative segment was 55.3% lower y-o-y at RM283mil due to higher provisions in Thailand and Singapore.

Commenting on these provisions, Tengku Zafrul said that they were caused by the oil and gas (O&G) sector.

“The O&G companies in Singapore were really affected by the slowdown, but our O&G exposure for the whole group is 2.8% of total assets, and in Singapore, it is only 0.4% of total assets,” he pointed out.

“Most of the issues that we were concerned about in Singapore on our exposure were in FY16. It should be better in FY17. The business in Thailand was affected by the rice sector. We didn’t expect it to be bad but we took the provisions,” Tengku Zafrul added.

For its Indonesian segment, he said profitability had improved some 500%, driven by better revenue, cost controls and lower provisions.

“We expect FY17 to be a better year for Indonesia, as provisions are expected to be lower than FY16,” he said.

On its tie-up with China Galaxy Securities Co Ltd, Tengku Zafrul said the bank expected this to be completed by this month or in April.