Group CEO Abdul Rahman reiterates the bank’s focus on completing its Forward23 strategic plan and delivering on key focus areas.
KUALA LUMPUR: Malaysia’s second largest banking group CIMB Group
Holdings Bhd is maintaining its vigilant stance for 2024, while attributing to the familiar factors of China’s sluggish recovery and global geopolitical tensions, coupled with continued industry competition for deposits.
Group chief executive Datuk Abdul Rahman Ahmad reiterated the bank’s focus on completing its Forward23+ strategic plan and delivering on key focus areas such as affluent and wealth management, as well as strengthening its current account-savings account (Casa) and deposit franchise.
In addition, he said these are on top of implementing effective balance sheet management to improve CIMB Group’s regional net interest margin (NIM).
Speaking at a media conference here yesterday in conjunction with its results release for the fourth quarter (4Q23) and full fiscal year (FY23) ended Dec 31, 2023, Abdul Rahman revealed that net profit for the quarter had surged 29.5% year-on-year (y-o-y) to RM1.72bil.
He attributed the bullish performance to overall strong revenue growth in core markets and lower provisions, which also saw turnover edging up by 3% y-o-y to RM5.38bil.
Results were also similarly impressive from the full year perspective, as net earnings climbed 28.3% y-o-y to RM6.98bil, in line with revenue with grew 5.9% to RM21bil, which Abdul Rahman said was due primarily to positive impact from the successful execution of the group’s Forward23+ strategy, particularly in enhancing its Casa franchise and driving its asset quality improvements sustainably.
“We saw robust operating income growth with solid loan and Casa growth from all core markets, coupled with lower provisions from prudent risk management and recoveries,” he said.
Dissecting the numbers further, he reported that the improvement in income for FY23 was led by stronger non-interest income which grew 36.5% y-o-y to RM6.39bil, offsetting the challenging net interest income (NII) environment due to continued heightened cost of deposits, as NII dipping 3.5% to RM14.6bil.
Interestingly, both Abdul Rahman and CIMB Group’s group chief financial officer Khairul Rifaie are optimistic that competition for deposits will moderate in 2024, although the former noted that further monitoring will always be necessary.
Khairul, meanwhile, observed that competition for deposits picked up slightly in the beginning of 4Q23, but has since tapered off in the first quarter of 2024.
Furthermore, Abdul Rahman said total gross loans, deposits and Casa for the lender also saw positive growths in FY23, recording 8.3%, 8.1% and 11.5% y-o-y increases respectively, underpinned by key countries and segments.
He added: “The positive rise in out yearly net profit translated to a return on average equity (ROE) of 10.7%, a significant improvement to our reported FY22 ROE of 9%.”
At the same time, he announced that the bank has proposed an all-cash second interim dividend of 18.5 sen per share, bringing the total annual interim dividends to 36 sen per share.
“As part of the group’s capital optimisation strategy, a special dividend of RM747mil or seven sen per share was also declared. This translates to a record total dividend payout of RM4.59bil, providing shareholders with higher returns,” he said.
On the other hand, cost-to-income ratio for the group was marginally higher y-o-y at 46.9%, with FY23 operating expenses rising by 6.9% from cost inflation and technology investments.
This led to the group’s pre-provisioning operating profit growing 5.1% to RM11.2bil, as total provisions declined significantly by 26.4% y-o-y, attributed to the moderated credit environment and sustained improvement in asset quality from portfolio reshaping.
Elaborating on provisions, Abdul Rahman said total provisions during FY23 had decreased by 26.4% y-o-y to RM1.59bil from lower expected credit loss in the consumer and commercial segments, which in turn translated to a loan loss charge of 32 basis points.
“This signified further improvement from the 51 basis points recorded in FY22 and within the target for the year. Our loan loss allowance coverage stood at 97.0%, with a gross impaired loans (GIL) ratio of 2.7%, compared to 3.3% GIL ratio recorded in FY22,” he said.
Meanwhile, compared with the third quarter ended Sept 30, 2023 (3Q23), net profit was slightly lower by 7.2% from RM1.85bil, with the bank pointing to reduced pre-tax profit for its consumer banking segment, from a combination of lower provision write backs and more conservative provisions in Thailand.
Moreover, CIMB Digital Assets & Group Funding pre-tax profit was also 15.8% lower quarter-on-quarter from NIM compression and higher operating expenditure and provisions.
Persisting with strategies that have worked moving forward, he said the bank has invested close to RM3.44bil of capital expenditure over the last four years into technology and operations to strengthen its resiliency and digital platform reliability.
Abdul Rahman commented that the investment has borne meaningful impact as CIMB Group’s digital platforms’ availability have remained above target and delivered strong growth in digital transactions and revenue.
“As we develop our strategy beyond Forward23+, our focus now shifts towards accelerating our digital initiatives to transform customer acquisition and experience, structurally reducing cost to operate and deliver sustainable returns from our digital ventures,” he said.
