CIMB sees marginal impact from OPR cut

MITI deputy minister Dr.Ong Kian Ming and MATRADE chairman Tan Sri Dr.Halim Mohammad witnessing the exchange of documents between MATRADE CEO Datuk Wan Latiff Wan Musa (left) and CIMB Group group CEO Tengku Datuk Seri Zafrul Tengku ABdul Aziz (right).

KUALA LUMPUR: The recent cut in the overnight policy rate (OPR) will only result in a marginal impact in terms of net interest margin (NIM) compression for CIMB Group Holdings Bhd.

Group chief executive officer Tengku Datuk Seri Zafrul Aziz said the full year impact for financial year 2020 (FY2020) was expected to be around three to four basis points (bps) of NIM compression.

This he said, will have an impact on the bank’s topline revenue.

Zafrul Aziz: The impact is marginal. We are able to mitigate this through optimising some of the other investments that we want to make

“If you look at how we addressed this issue in 2019 because based on our Q3 results that we announced at the end of November...now we have to relook and manage the portfolio better. The impact is marginal. We are able to mitigate this through optimising some of the other investments that we want to make, ” he told reporters after signing a memorandum of understanding (MoU) on behalf of the bank with the Malaysia External Trade Development Corporation (Matrade) to boost the readiness of Malaysian exporters in sustainability yesterday.

He added that CIMB will continue looking at optimising some of its investments to ensure that its cost to income ratio, efficiency and productivity continue to improve because its margins will be further compressed moving forward.

Bank Negara on Jan 22, lowered the OPR by 25 bps to 2.75%, the second rate cut in nine months. It had earlier dropped the OPR by 25bps to 3% on May 7 last year.

Zafrul reiterated that the OPR cut has a very small impact and as a bank, CIMB focusses on areas it can improve on to mitigate any shocks such as the coronavirus outbreak.

“The performance of a bank is highly correlated with the gross domestic product (GDP) so as a bank, we cannot escape.

“If the economy does better, then obviously we will benefit. If the economy is impacted by all these external shocks, then the banking industry will be somewhat impacted, ” he said. Asked if he foresees another OPR cut possibility, Zafrul said CIMB shares the consensus view of the market, which is an expectation of another rate cut, sometime in the second half of the year. He expected Malaysia’s GDP to grow between 4% and 4.5% and the bank is still looking at a very strong positive loan growth.

CIMB is expected to announce its FY19 results by the end of this month. The bank’s share price closed 1.44% higher RM4.92 yesterday. Year-to-date, the counter has fallen 4.47%.