CEO: CIMB financial targets remain intact

KUALA LUMPUR: CIMB Group Holdings Bhd may take an additional and final provision in the first quarter of 2022, for the processing error which impacted 11,800 accounts out of close to eight million of the banking group’s customers.

However, the additional and final provision may be lower than the expected credit loss of RM281mil provided in the fourth quarter of 2021, depending on the group’s recovery engagement and outcome with customers.

In January 2022, the group discovered a processing error that was related to a specific third-party financial remittance service, which led to a limited number of customers receiving duplicate credits to their accounts.

The group is pursuing the necessary measures to recover the duplicate payments from the affected customers.

CIMB Group CEO Datuk Abdul Rahman Ahmad told an online media briefing: “We do not expect the potential and additional and final provision, to be made in the first quarter in 2022, to have material impact on our 2022 financial targets.”

Abdul Rahman pointed out that the group is fully committed to adhering to the central bank’s policy on fair treatment of financial customers.

“Now, this includes providing very clear evidence and documentation of the double credits in their bank statements and formulating flexible repayment scheme based on the individual circumstances.

“At the same time, immediate actions have been taken by the group to fix and remedy the error, and additional controls have been implemented to prevent similar incidents recurring. We’ve also embarked on a major review of mitigating controls and policies and procedures surrounding our transaction processing infrastructure.

“Our system remains secure and there’ll be no system breaches,” he said.

The targets for financial year (FY) ending Dec 31, 2022, included core return on average equity (ROE) of 8.5% to 9%, loan growth of 5.0% to 6.0%, cost-to-income ratio (CIR) of below 49% and maintaining its Common Equity Tier 1 (CET1) ratio of above 13%.“However, our reported ROE performance will likely be sustained at 7% to 8%, affected by the one-off Cukai Makmur (prosperity tax) introduced in Malaysia for 2022,” added Abdul Rahman.

On the outlook for 2022, he said while it remains mixed and uncertain due to pandemic-related developments such as the Omicron variant, “we believe the economies we operate in will show further recovery in 2022 due to the significant progress of vaccination programmes and the opening up of economic activities. We are also hopeful of the progressive migration of customers out of repayment assistance over the year.”

The group also plans to invest close to RM1.2bil in FY22 in technology and operations, as it is accelerating its digital transformation and further strengthening its operational resilience.

Abdul Rahman said the group’s digital businesses continued to register healthy growth.

“Touch ‘n Go Digital’s registered users increased to 16.8 million, up 10.5% year-on-year. GO+, the investment offering available in Touch ‘n Go eWallet, has also exceeded two million investors, with total assets under management growing by 261.8% in the fourth quarter of 2021 to RM492mil as at December 2021,” he said.

Meanwhile, CIMB Philippines grew its customer base by 64.5% to 5.1 million customers and its deposit book by 75.2% to RM1.29bil.

“This makes CIMB Philippines not only a leading digital bank in the Philippines, but also one of the fastest growing digital banks in Asean,” he added.

“Our priority remains on executing our Forward23+ strategic plan to build on our positive growth momentum, supported by a focused approach in making the necessary investments into our areas of growth such as affluent and wealth management, transaction banking and Asean network business.

“In addition, we will intensify efforts to advance our environmental, social and governance agenda, in line with the group’s commitment to mobilise RM30bil in sustainable finance by 2024,” said Abdul Rahman.

He noted that notwithstanding the provisions, the group met or exceeded its FY21 targets across all profitability metrics, including ROE, CIR and credit cost/provisions.

“The group remains well-capitalised as it achieved its highest ever CET1 ratio of 14.5% as at December 2021, from 13.9% as at September 2021 and 13.3% as at December 2020, reflecting the group’s capital strength and resilience,” he said.

For its fourth quarter ended Dec 31, 2021 (Q4’21), the group posted a 297% year-on-year jump in net profit to RM854.5mil while revenue dropped slightly by 1.7% to RM4.59bil.

In a statement, the group said, on a year-on-year basis, Q4’21 core operating income declined slightly by 1.3%, whilst core pre-tax profit grew by 552.4% and core net profit increased by 277.2% due to significantly lower provisions compared with Q4’20 at the peak of the pandemic’s economic disruption.

Core figures exclude the net impact of all exceptional items recorded in FY21 and deferred tax asset gain on Cukai Makmur which collectively amount to a post-tax net charge of RM353mil.

For FY21, net profit jumped 260% year-on-year to RM4.3bil while revenue jumped 14.9% to RM19.5bil.

It said the improved FY21 performance was driven by higher operating income with recovery across all segments and markets, and further supported by strong cost controls and significantly lower provisions.

The group proposed a second interim dividend of 12.55 sen per share, which will bring dividend for FY21 to 22.99 sen per share for a payout ratio of 50% based on core net profit.