KUALA LUMPUR: CIMB Group Holdings Bhd’s net profit of RM949.94mil for the second quarter ended June 30 came in below consensus estimates, as difficult operating conditions in Indonesia dragged down the group’s overall performance.
Its earnings for the quarter represented a 9.9% decline from the RM1.05bil registered in the corresponding quarter a year ago. Consequently, the group’s earnings per share (EPS) fell to 11.36 sen from 14 sen previously.
During the quarter, CIMB’s revenue fell a marginal 1% to RM3.41bil from RM3.44bil.
On the back of its year-to-date performance, the second largest banking group in Malaysia declared a first interim dividend of 10 sen per share to be paid in cash, or an optional dividend reinvestment scheme.
The total interim dividend amounted to a net payment of RM834mil, which would translate to a dividend payout ratio of 41.3% of the group’s profit for the first six months of the year.
“It was a difficult first half, due mainly to the tough conditions in Indonesia and the sharply weaker rupiah, which combined to decrease PT Bank CIMB Niaga Tbk’s pre-tax profit contributions by 19.8%,” CIMB group chief executive Datuk Seri Nazir Razak said at a media briefing on the company’s second-quarter financial performance.
“In addition, low financial market volumes and volatility across the region led to weaker investment banking and treasury businesses,” he added.
Nevertheless, Nazir noted that excluding Indonesia and last year’s exceptional gain, CIMB’s pre-tax profit registered a gain of 5.9% year-on-year, lifted by strong performances of the group’s Malaysian consumer bank, CIMB Bank Singapore and CIMB Thai.
For the first six months of the year, CIMB’s net profit fell 17.4% to RM2.02bil from RM2.44bil in the corresponding period of 2013, when the group registered an exceptional gain of RM365mil from the sale of its stake in CIMB Aviva.
Hence, the group’s EPS fell to 24.56 sen in the first half of 2014 from 32.60 sen previously. Its revenue during the period was also lower at RM6.95bil, which represented a decline of 6% from RM7.39bil previously.
Based on CIMB’s performance for the first half of 2014, Nazir conceded that the group’s annualised net return on average equity at 12.2% currently was trailing behind its full-year target of around 13.5% to 14%.
“As it stands now, what is key is (our operations in) Indonesia. We think that as far as our targets are concerned, all the other operating units should be around where we want them to be for the year,” Nazir said.
CIMB owns a 97.9% stake in CIMB Niaga, which represents about 30% of the group’s portfolio.
“I suppose the second half and the final outcome will depend on how CIMB Niaga performs by the year-end,” Nazir said, adding that the group was also cautious on the policy uncertainties in Indonesia under the newly elected president Joko Widodo.
According to Nazir, the operating environment in Indonesia is expected to remain challenging, as last year’s sharp turn in Indonesia’s terms of trade, interest rates and currency impacted borrowers and liquidity in the system.
“CIMB Malaysia should have a steady second half, while CIMB Singapore continues to grow strongly. With the improving economic outlook for Thailand, we are also optimistic on the outlook for CIMB Thai, and given our strong market shares in treasury markets and investment banking, we remain primed to benefit when market volumes and volatility improve,” he explained.
Meanwhile, CIMB extended its regional presence with the opening of the CIMB Thai-Vientiane branch in Lao PDR yesterday. The Vientiane branch is the group’s first presence in Lao PDR, and CIMB Thai’s first branch abroad. The group is now present in nine of 10 Asean countries.
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