PETALING JAYA: CIMB Group Holdings Bhd, which is focusing on organic growth, expects its non-interest income to outpace its net interest income from loans as the group gears up to face unexpected challenges for the year.
CIMB Group chief executive officer Datuk Abdul Rahman Ahmad told StarBiz given the prevailing economic situation, the group would likely adopt a selective approach to loan growth in view of the need to reshape its portfolios across the region.
“As such, non-interest income will likely grow faster this year given our focus on treasury and markets, wealth management and transaction banking, as well as the expected resurgence of capital market-related deal flows and increased transaction activity, ” he said.
At the moment, net interest income makes up some 74% of the group’s revenue, while non-interest income accounts for 26%.
He added under the group’s Forward 23+ mid-term strategy for 2021, greater focus, among others, would be placed on growing the treasury and markets business, particularly in core markets.
At the same time, Abdul Rahman said CIMB would increase the penetration of the transaction banking business to provide a greater value proposition to its clients and facilitate trade and business flows.
As part of its Forward 23+strategy, he said the group has begun reshaping its portfolios to ensure it is well-positioned to accelerate growth in key segments.
“We anticipate consumer banking growth across the group, especially in select core markets. This is because underlying demand remains strong, with strong liquidity for those who have been less impacted by the pandemic.
“We should see significant growth in this segment, both in line with market growth and in terms of growing market share. Given our Asean footprint, wealth management will be a key growth driver regionally, backed by our local expertise, strong product suites, and service capabilities, especially in the Preferred and Private Banking space.
“In Malaysia, demand remains strong in our commercial banking segment as well, especially our SME business. Certain businesses such as those in logistics continue to grow, even amid the Covid-19 environment, ” he added.
Across the group, Abdul Rahman said digital is priority as online banking has become the primary banking experience for most customers, a shift that has only been accelerated by the pandemic.
“We will continue to enhance our digital platforms to provide a seamless and differentiated customer experience. We will also build on the momentum of digital businesses under CIMB Digital Assets to grow the cashless ecosystem, and promote inclusive and sustainable digital financial services, ” he noted.
He said given the resurgence of the pandemic and the necessary restrictions until the majority of the population have been vaccinated, CIMB would maintain a cautious growth stance in 2021.
The group, he stressed, would be guided by its Forward23+ strategy and would invest in key growth areas and transform its business digitally.
Enhanced risk management, prudent cost optimisation and targeted investments across the business would remain priorities as the group seeks to drive efficient growth and productivity, he noted.
With expected lower provisions, CIMB anticipates considerably better financial performance in 2021.
Abdul Rahman said although the group expects better performance in 2021 across most segments and markets from optimism fueled by a vaccine-driven recovery, the disciplined execution and focused investments would still be key in ensuring it would be able to tap into growth opportunities in tandem with economic recovery.
“This year will be the first full year of Forward23+, under which CIMB aims to be the leading focused Asean bank.
“We have already started to make progress, and with core programmes in place to ensure delivery of business outcomes, we are confident that we are on track to deliver on our ambition, ” he said.
In the fourth quarter ended Dec 31,2020 (Q4), CIMB Group posted a lower net profit of RM215mil due to elevated loan provisions.
For the full financial year, the group posted a lower net profit of RM1.19bil, while revenue fell 3.4% to RM17.19bil.
UOB Kay Hian in a recent note said it remained optimistic about the group’s strong earnings recovery prospects in 2021 on the back of a significant reduction in lumpy bonds and lower provisions.
The research house expects CIMB to deliver the strongest earnings growth among peers, forecast at 201% in 2021.
CIMB Group’s share price closed 12 sen up or 2.75% to RM4.49, representing a market capitalisation of RM44.55bil.