KUALA LUMPUR: CIMB Group Holdings Bhd expects the outbreak of the novel coronavirus (Covid-19) to have limited impact on its assets.
This is based on the lender’s small exposure to sectors, whose businesses are directly affected by the epidemic, according to its group CEO Tengku Datuk Seri Zafrul Aziz.
“Based on the current situation, the impact is expected to be small, given the size of our exposure to sectors most affected by Covid-19, such as tourism and food & beverage, at only 2%-3%, ” he said.
“Nevertheless, we will continue to monitor the situation closely to ensure the impact is contained, ” he said at the company’s briefing for financial year ended Dec 31,2019 yesterday.
Overall, Tengku Zafrul said he expected 2020 to remain a challenging year given the macroeconomic headwinds, coupled with uncertainties due to the Covid-19 outbreak.
“However, we remain cautiously optimistic that in the second half of 2020; the Malaysian economy in particular will improve from the recently announced stimulus package and other private sector initiatives, ” he said.
He noted the RM20bil fiscal stimulus was expected to add 0.5% to Malaysia’s 2020 gross domestic product growth (GDP). CIMB forecasts GDP growth would be around 3.6%-3.7%.
The country’s second largest banking saw its net profit dip 24% for the fourth quarter ended Dec 31,2019, to RM848.6mil from RM1.1bil in the previous corresponding quarter due to a decline in non-interest income and a lower gain on a non-performing loan sale.Consequently, its earnings per share (EPS) slipped to 8.56 sen, from 11.67 sen previously.
For the quarter in review, its revenue grew 11% to RM4.52bil fromRM4.07bil in the previous corresponding quarter.The group declared a second interim net dividend of 12 sen per share.
For the full year, CIMB’s group net profit slid 18.3% to RM4.56bil in 2019, from RM5.58bil in 2018, with EPS declining to 46.98 sen from 59.67 sen.This was despite the 2.4% revenue growth to RM17.8bil last year, from RM17.38bil in 2018.”For us, 2019 came in within expectations.
We have met all our targets despite the challenges, “ Tengku Zafrul said.He said the 2019 decline in earnings was due to an exceptional one-off item, that is, the transformation costs. In addition, the group registered big gains from a 2018 sale of its asset management businesses.For 2019, CIMB’s operating income grew 8.2% year-on-year (yoy) to RM17.8bil, underpinned by growth in net interest income and non-interest income.
Net interest income grew 6.3% yoy to RM12.66bil from the 6.7% loan growth.
The 12.9% improvement in non-interest income to RM5.14bil came largely on the back of improved capital market activity.The gross loan growth of 6.7% was attributed to strong growth posted by Thailand and Malaysia.
Total deposits were 5.8% higher yoy, while the loan to deposit ratio stood at 92% from 91.2% at Dec 31,2018.Net interest margin (NIM) was relatively flat at 2.46%. It expected margin compression of five to 10 basis points this year due to an expected interest rate cut by Bank Negara.
For 2020, CIMB expects its loans growth to be 6%, outperforming the projected growth for the industry at 4%.
Its return on equity is expected to be 9%-9.5% for 2020.
Tengku Zafrul said the group would continue to invest in technology. It would also focus on growing its business in Vietnam and the Philippines.
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