CIMB Bhd says activity in its key debt securities business has been great, and it has no plan to cut its profit forecast for the full year even though economic conditions are difficult.
CIMB's core business is capital markets, and the dynamics of the capital markets are there. There is a bull run in the bond market and that is an important area of our business,'' said group chief executive Nazir Razak.
Speaking after the company's inaugural AGM in Kuala Lumpur yesterday, Nazir said activity in the secondary ringgit bond market, a key driving factor of CIMB's earnings, had reached record levels during the first quarter of the year.
He said RM136bil worth of bonds were traded in the first three months of the year.
The previous best quarter was the third quarter of 2001 when RM118bil worth of bonds were transacted in the secondary market.
Nazir said the primary bond market had also been active during the first quarter, with about RM6.2bil worth of issues.
The RM40bil target for the year is probably still achievable, because several large transactions that have already been announced will take place in the second and third quarters,'' he said.
He expects activity in the bond market to be maintained, as interest rates do not appear to be rising anytime soon with continued geopolitical uncertainty and the problem of Severe Acute Respiratory Syndrome (SARS).
Nazir said although the worries over SARS had dampened earnings of certain segments of the economy, mergers and acquisitions hinged on a multitude of other factors.
There are companies that are attractive with or without SARS and that creates opportunities for corporate activity,'' he said.
For instance, one of the factors that is important is refinancing of companies. There, it is not really demand of activity, but current borrowing cost in the banking market versus what you will pay if you refinance in the bond market.''
Activity in the company's third main business segment corporate advisory appears to be good, Nazir said, citing the deals, such of those involving UEM World, Malaysian Resources Corp Bhd and Crest Petroleum Bhd, transacted during the first quarter.
He, however, said the outlook for the equities market is seen to be grimmer than last year, as the amount of equity issuance is projected to fall to RM4bil from RM12.8bil.
With conditions in CIMB's main businesses appearing strong in the first quarter, Nazir said, it was premature to say how the whole year would unfold. It is still early days, but the forecast is alive and kicking; unless we announce otherwise,'' he said.
CIMB is expected to earn a profit after-tax of RM135.7mil for the financial year ending Dec 31,compared with a pro forma after-tax net profit of RM130.4mil last year.
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