CIMB 3Q net profit up 31%

CIMB said it is optimistic of delivering better performance for the financial year 2023.

PETALING JAYA: Amid an industry-wide deposit competition that compressed its margin in the third quarter ended Sept 30, 2023 (3Q23), CIMB Group Holdings Bhd reported its highest quarterly earnings in 2½ years, driven by a strong non-interest income (NOII).

The third largest listed bank, which 3Q23 net profit surged by 31.3% year-on-year (y-o-y), said it is optimistic of delivering better performance for the financial year 2023 (FY23), despite moderation in the “performance of key operating countries”.

Nearing the final year of its Forward23+ strategy, CIMB also said it remained focused on growing its loans portfolio and its current account saving account (CASA), in addition to the preferred banking and wealth management businesses.

The banking group also aims to sustain its net interest margin (NIM) levels despite the competitive deposit environment.

In 3Q23, CIMB’s net profit rose to RM1.85bil from RM1.41bil in the previous year corresponding quarter, thanks to higher operating income and lower provisions.

Revenue or operating income rose by 6.2% y-o-y to RM5.31bil, with a strong NOII improvement, partially offset by weaker net interest income (NII) due to NIM compression from higher cost of deposits.

“Consumer banking pre-tax profit grew 19.8% y-o-y to RM932mil from higher operating income and significantly lower provisions.

“Commercial banking pre-tax profit was relatively muted, growing 0.3% y-o-y from positive pre-provisioning operating profit partially offset by higher provisions.

“Wholesale banking pre-tax profit was higher by 5.8% from improved NOII and lower provisions.

“CIMB digital assets and group funding pre-tax profit rose 23.1% y-o-y with stronger income from group funding, as well as lower provisions,” the banking group said in a filing with Bursa Malaysia.

Following the improved profitability, CIMB’s basic earnings per share in the quarter widened to 17.32 sen as compared to 13.43 a year earlier.

However, no dividend was declared for the quarter.

Cumulatively, in the nine-month period ended Sept 30, 2023 (9M23), CIMB’s net profit rose by almost 28% y-o-y to RM5.27bil, while revenue increased by 7% y-o-y to RM15.64bil.

The positive performance was driven by sustained operating income growth and lower provisions as the group continues to benefit from its diversified Asean portfolio.

In 9M23, CIMB’s NII dipped slightly by 1.8% y-o-y, largely due to NIM compression. Meanwhile, NOII saw robust performance, growing by 35% y-o-y to RM4.71bil driven by stronger investment and market related income.

CIMB’s total gross loans growth momentum continued, rising 6.4% y-o-y, underpinned by strong demand across markets and segments, while deposits grew 8.6% y-o-y despite persistent competition for deposits in all markets.

Total CASA balances expanded by 2.1% y-o-y, bringing about a CASA ratio of 39.2% as of September.

The banking group’s cost-to-income ratio was marginally higher year-on-year at 46.3%, as 9M23 operating expenses rose by 7.4% y-o-y from cost inflationary pressures.

Commenting on capital position, CIMB said it remains strong with the Common Equity Tier-1 ratio improving 30 basis points y-o-y to 14.4% as at end-September, exceeding the group’s target for FY23.

Total capital ratio stood at 17.9%, while the liquidity coverage ratio remains well above the regulatory requirement of 100% for all banking entities within the group.

Total provisions improved significantly by 28.3% quarter-on-quarter and 15.9% y-o-y to RM1.19bil for 9M23 from lower consumer provisions, given a moderated credit environment and improved asset quality.

This led to an improved 9M23 annualised loan loss charge of 32 basis points. The banking group’s loan loss allowance coverage stood at 95%, with a gross impaired loans ratio of 3.2%.

CIMB group chief executive officer Datuk Abdul Rahman Ahmad noted that the banking group’s return on equity (RoE) has continued to improve, driven by its reshaped portfolio and improved credit cost performance.

The annualised RoE improved to 10.7% in 9M23 from 9.1% recorded in the corresponding nine-month period.

He also said CIMB is firmly on track to meet its FY23 targets as it approaches the year-end.

Notwithstanding the positive performance, Rahman said CIMB remained cautious given heightened global political risks, coupled with continued elevated interest environment which is likely to lead to a deceleration of global economic growth.

Looking ahead into FY24, he said the banking group would focus on growing in its targeted segments while continuing to keep a close watch on cost and asset quality.

“Among our focus segments are our affluent and wealth management business with particular emphasis on transaction banking and the regional Asean network business.

“We will continue to leverage the growing interest and demand among clients for sustainable and Islamic finance solutions, areas in which CIMB has built a strong track record having pioneered various landmark transactions and innovative offerings over the past few years,” he added.On its environmental, social and governance agenda, Rahman pointed out that CIMB aspires to be an Asean sustainability leader.

He noted that in September, CIMB announced that it had more than tripled its sustainable finance target to RM100bil by 2024 under its green, social, sustainable impact products and services framework, from its initial RM30bil target previously announced in 2021.

“We are pleased to be the first Malaysian bank to announce our climate targets for the cement, coal, palm oil and power portfolios where we set out CIMB’s 2030 decarbonisation plans for these sectors as part of our 2050 net-zero targets,” he said.