PETALING JAYA: Tengku Datuk Seri Zafrul Aziz, who is now the Finance Minister, has left CIMB Group Holdings Bhd at a time when the banking industry is facing one of its toughest times in recent years.
As the hunt goes on for a successor for the bank, it goes without saying that the person would have his job cut out for him.
It is understood that there are three names, two of which are internal candidates, that are being bandied about for this position, including CIMB’s current group chief operating officer Omar Siddiq Amin Noer Rashid, who has been appointed as officer-in-charge following the departure of Tengku Zafrul yesterday.
That said, banks are experiencing extremely challenging times, seeing tepid loan disbursements, owing to slower economic growth amid a host of negative factors such as the Covid-19 breakout.
Analysts have cautioned that if the Covid-19 outbreak is to worsen, lending by banks could come in even slower than what was earlier projected.
Additionally, the recent cut in the overnight policy rate (OPR) - the second since January - would further put pressure on the earnings of banks which make their money from lending funds to consumers.
In a recent report on the banking sector, Maybank IB Research said it has cut FY20/21 earnings by 2%/1% respectively.
“We now expect aggregate core net profit for our banks to grow just 0.4% versus +2% in 2019, ” it told clients.
Maybank also said factoring in another 25 basis point cut, it now expects an additional 2 basis points compression in net interest margin (NIM) this year, which implies a 6 basis point NIM compression year-on-year (yoy) to 2.17% in 2020.
“Our NIM estimates for 2021 are also lowered by two basis points on average, for an expected three basis points year-on-year compression to 2.14%.”
This week’s plunge in oil prices could exacerbate the situation.
Tengku Zafrul took over the helm of CIMB group in 2015 from veteran banker Datuk Seri Nazir Razak.
He oversaw a four-year transformation plan dubbed T18, which included selling the investment banking business in Australia and cutting headcount in Malaysia and Indonesia.
In FY2018, the group, which is 23.8% controlled by Khazanah Nasional Bhd, posted its highest ever net profit of RM5.58bil which laid out the next phase of growth called Forward23.
Under Forward23, some ambitious targets have been set.
It remains to be seen whether the lender can achieve its targets set out under this plan given the challenging environment here and in all of its home markets of Singapore, Indonesia and Thailand.
The banking group saw a 24% drop in its net profit for the fourth quarter ended Dec 31,2019 to RM848.6mil from RM1.1bil in the same period before. For the full year, the group’s net profit declined 18.3% to RM4.6bil, from RM5.9bil, while revenue went up 2.4% to RM17.8bil. Shares of CIMB closed up 3.57% at RM4.35 yesterday after consecutive days of trading lower.