CIMB's 3Q pre-tax profit improves sequentially on higher operating income

KUALA LUMPUR: CIMB Group Holdings Bhd recorded a pre-tax profit of RM454mil in the third quarter ended Sept 30,2020, up 132% from the immediate preceding quarter on higher operating income across nearly all its segments.

Over the nine months period to Sept 30, the group registered a pre-tax profit of RM1.36bil and net profit of RM979mil, which translates to an annualised return on equity of 2.3% and earnings per share of 9.9 sen for the period.

On a quarter-on-quarter basis, 3Q operating income was 15.5% higher at RM4.47bil from RM3.87bil in 2Q due to increases in both net interest and non-interest income.

Net interest income rose 10% to RM3.23bil while non-interest income jumped 32.9% to RM1.24bil due to improved trading and FX activity in the quarter. Pre-provisioning operating profit rose 29.9% q-o-q to RM2.26bil.

The group said in a statement that its performance continued to be impacted by the ongoing Covid-19 pandemic. During the period, it also recorded elevated provisions in key markets on specific accounts to strengthen the balance sheets, adjustments due to macro-economic factors and modification loss arising from the moratorium given to borrowers in Malaysia.

However, the group's underlying business remained resilient with operating income growing sequentially across nearly all segments with gross loans and deposits increasing 1.6% and 6.1% respectively. Current account savings account (Casa) ratio strengthened to 40%.

"Our 3Q20 performance came within expectations due to the continued impact of the pandemic, and the 4Q20 economic outlook remains subdued given the resurgence in Covid-19 cases domestically and globally.

"Nonetheless, we are encouraged to see quarterly improvements with underlying performance remaining resilient despite the impact of elevated provisioning on specific accounts, modification loss and MEF adjustments," said CIMB group CEO Datuk Abdul Rahman Ahmad.

Abdul Rahman noted that the group recorded strong operating income amid a further overnight policy rate cut in 3Q to 1.75% in Malaysia, and a low interest rate environment in its core markets.

The performance was driven by a strong rebound in the group consumer banking's wealth management and bancassurance units, and supported by an improved Casa ratio and stronger loan growth group-wide, he said.

The group's operating expenses were significantly improved with cost-to-income (CIR) ratio declining to 49.4% in 3Q, including modification loss impact.

Over the three quarters to Sept 30, operating expenses declined 5.5% to RM6.65bil year-on-year due to tight cost controls. Including modification loss, 9M20 CIR stood at 53.3%.

"We are on track to achieve our aggressive cost reduction target of RM500mil for FY20 to mitigate the impact of the challenging economic environment.

"We have also intensified asset quality monitoring and are proactively taking steps to strengthen our financial position, guided by an enhanced risk management approach,” said Abdul Rahman.

The group remains well-capitalised with an improved CET1 ratio of 13% and total capital ratio strengthening to 16.7% as at September. Gross impaired loans stood at 3.4%, which was slightly improved from 3.6% in June.

Moving forward, CIMB will nagivate the macroeconomic challenges with its mid-term strategic plan, Forward 23+.

“Under Forward23+, our aim is to be the leading focused ASEAN bank, where we will focus on key markets and segments in which we have competitive advantage through our strong 4 ASEAN footprint.

“We will accelerate investments in focus areas with high growth potential where we have already established a unique value proposition and leverage on economic recovery,” said Abdul Rahman.

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