CIMB Group Holdings group CEO Novan Amirudin
KUALA LUMPUR: CIMB Group Holdings Bhd
believes it can keep to its financial year 2025 (FY25) return on equity (ROE) guidance of between 11% and 11.5%, despite facing various challenges ahead, which include the lowering of the overnight policy rate (OPR), as well as similar rate cuts throughout the region.
Group chief executive Novan Amirudin stressed that the lender, the second-largest banking group in the country by assets, needs to be “nimble” to mitigate the effects of declining rates and other macroeconomic challenges, making sure there is sufficient asset growth, as well as adequate cross-selling of products and services.
“On top of that, we need to maintain cost discipline and always be vigilant on asset quality.
“If we focus on these levers to mitigate these regional reduction rates, we are confident of maintaining our ROE,” he said last Friday in conjunction with the group’s results release for the second quarter ended June (2Q25).
Summarily, the ROE of a company is the ratio of its net profit against its shareholder equity, usually used as a gauge for how well a company uses the money invested by its shareholders to generate earnings.
Incidentally, CIMB Group saw 2Q25 net profit nudge lower by 3.7% year-on-year (y-o-y) to RM1.89bil, with revenue remaining stable at RM5.6bil.
In a filing with Bursa Malaysia, the lender attributed the marginally lower y-o-y profitability in 2Q25 to a flat operating income, as its non-interest income (NOII) growth from a gain on the sale of non-performing loans (NPL) in Indonesia was offset by lower net interest income (NII).
It said consumer banking pre-tax profit declined 16.8% y-o-y to RM708mil due to a lower NII from net interest margin (NIM) pressure and higher provisions, before adding that commercial banking pre-tax was 17.5% higher y-o-y, driven by strong NOII growth and lower provisions.
“Wholesale banking pre-tax profit declined 9.5% y-o-y due to significantly lower writebacks in 2Q25 compared to 2Q24. CIMB Digital Assets & Group Funding pre-tax profit rose 24% y-o-y contributed by stronger Touch n Go Digital and Group Funding performance,” CIMB Group pointed out.
For the six months ended June (1H25), net profit had stayed steady at RM3.86bil, despite a 1.2% y-o-y marginal pullback in revenue to RM11.1bil, which the bank deemed as a “resilient” showing despite macroeconomic headwinds, increased market volatility and foreign-exchange translation effects.
“Although 1H25 net profit declined by 0.9% y-o-y (from RM3.9bil in 1H24), on a constant currency basis, 1H25 net profit would have increased by 3.3%.
“Despite the challenging environment, the group delivered an annualised ROE of 11.1% and an earnings per share (EPS) of 36 sen,” elaborated the bank.
It has proposed an all-cash first interim dividend of 19.75 sen per share based on a consistent payout ratio of 55.5%, which translates to a total dividend payout of RM2.1bil.
While CIMB Group saw an increase in turnover of 1.9% compared to the RM5.5bil of 1Q25, net profit dipped 4.3% from RM1.97bil, with the group crediting a strong NOII growth of 5.3% from higher trading income, a gain on NPL sales and a 0.4% NII improvement arising from focused cost of funds management for the better revenue.
It said consumer banking profitability declined due to NIM contraction and timing of overlay provisions, as wholesale banking profits also dropped due to a weaker corporate banking performance.
Meanwhile, the group’s cost-to-income ratio (CIR) came in at 46.2% in 1H25, reflecting overall cost discipline while operating cost declined 1.1% q-o-q, it continues to invest in technology and operational resilience.
Concurrently, gross impaired loans (GIL) ratio improved q-o-q and y-o-y to 2.1% as at June, which the group said reflected its strong asset quality in all markets.
Commenting on wholesale banking in particular, Novan is optimistic the segment would bounce back in 2H25 as a result of the currently visible pipeline of projects, observing that many of its clients are accessing debt capital markets for funding, with CIMB Group maintaining its position as one of the leading bond underwriters.
Moreover, he said: “At the beginning of the year, many corporates were understandably holding back large capital investments because of the tariff and ‘Liberation Day’ uncertainties, but now we have significantly more clarity and confidence is gradually improving, so we are seeing more commitments made by our clients.”
As such, despite the reducing rates environment, he believes that the group would be able to maintain NIM at the current level, based on the current ongoing pipeline and discussions, before adding: “Our proactive asset-liability management has allowed us to preserve NIM stability through rate adjustments, supported by strong asset quality and a healthy loan-to-deposit ratio of 88%.”
