KUALA LUMPUR: Total loan growth for the banking industry is expected to be at 4% to 5% this year, stronger than last year, says CIMB Group chief executive officer Tengku Datuk Seri Zafrul Aziz.
Tengku Zafrul said the higher-than-expected gross domestic product (GDP) growth in 2017 would translate into a stronger loan expansion this year.
“Last year’s loan growth was low due to a lower corporate loan growth. Based on the pipeline, corporate loan growth looks to be stronger this year.
“Given our size in Malaysia, we (CIMB) will not run far off from the industry’s targeted loan growth of 4% to 5% – of course we will try to make sure we will be slightly higher than that,” he said at a media briefing held in conjunction with the bank’s 10th Corporate Day 2018,.
In 2016, total industry loan growth was at 4% due to higher loan loss provisions, while total loan growth as of November 2017 stood at 3.9%.
CIMB expects GDP to grow 5.2% this year, driven by commodities, electrical and electronics as well as manufacturing sectors.
Key industries for mergers and acquisitions for the year would be the e-commerce and digital economy, banking and insurance, construction and infrastructure, consumer, as well as a potential oil and gas consolidation.
Going forward, CIMB expects its provision figures to progressively reduce and will announce such targets next month.
Tengku Zafrul added that the provision numbers for Malaysia were low last year and that the group was not affected by any large non-performing loans in the country.
On the other hand, provisions in Thailand and Indonesia improved in 2017 compared to 2016.
CIMB equity capital market and syndicate Asia head Derek Lim expects to see more than RM10bil being raised from “jumbo” initial public offerings (IPOs) in the first half of this year.
“These IPO sectors would be infrastructure, consumer and financial services. In addition, fund-raising activities from the Ace Market, Leap Market, mid caps and small caps will continue to be robust in 2018,” he said, adding that there would not be any impact from the impending general election.
The Malaysian fixed income and bond markets are expected to remain resilient, supported by RM90bil worth of infrastructure projects.
CIMB remains on track to meet its 2017 targets, having achieved a total loan growth of 6.4%, excluding forex fluctuations, for the nine-month cumulative period in 2017.
The group has indicated a financial year 2017 (FY17) total loan growth target of 7%.
In addition, CIMB has achieved an annualised return on equity (ROE) of 9.8% during the nine-month period.
The bank has a FY17 ROE target of 9.5% and a Target 2018 (T18) ROE of 10.5% to 11%, which was revised from the initial 15% in April last year.
For the third quarter ended Sept 30, 2017, CIMB registered a net profit of RM1.13bil, while net profit for the nine-month period amounted to RM3.41bil.
With 2018 being the final year for T18 initiatives, Tengku Zafrul is optimistic that the group would be able to achieve all set targets by year-end.
The group’s 2018 focus areas entail venturing into two new markets by going digital in Vietnam and establishing the bank in the Philippines by the third quarter of 2018.
In terms of portfolio optimisation, CIMB aims to complete the China Galaxy joint venture by the third quarter of the year.
The group will also establish a new target plan by the fourth quarter of this year, following the conclusion of T18.