CIMB Group chalks a record RM3.29 billion 1H18 Net Profit

Stocks and Financial Services Press Releases Wednesday August 29, 2018 15:57
Bangkok--29 Aug--CIMB Thai Bank
  • 1H18 record net profit of RM3.29 billion (+44.0% Y-o-Y) bolstered by RM928 million gain on sale of 20% of CPAM and 10% of CPIAM, which also increased ROE to 11.5% and reduced CIR to 46.1%
  • On BAU basis, 1H18 net profit was RM2.36 billion, translating to a 3.3% Y-o-Y growth
  • 7.4% Y-o-Y growth in BAU PBT to RM3.27 billion mainly from lower operating cost and provisions
  • Improved loan loss charge of 0.45% in 1H18 (cf. 0.66% in 1H17)
  • Strengthened Group CET1 ratio of 11.9% as at 30 June 2018
  • Proposed first interim dividend of 13.00 sen or 51.6% payout ratio
1) Summary

CIMB Group Holdings Berhad ("CIMB Group" or the "Group") today reported a record net profit of RM3.29 billion in the first half of 2018 ("1H18") bolstered by a gain from the sale of 20% of CIMB-Principal Asset Management ("CPAM") and 10% of CIMB-Principal Islamic Asset Management ("CPIAM") amounting to RM928 million. This raised the Group's 1H18 Return On average Equity ("ROE") to 11.5%, and reduced its Cost-to-Income Ratio ("CIR") to 46.1%.

On a Business-As-Usual ("BAU") basis, Profit Before Tax ("PBT") was RM3.27 billion for 1H18 representing a 7.4% year-on-year ("Y-o-Y") growth. Lower Y-o-Y operating expenses of 7.3% and loan loss provisions of 29.4% contributed to the Group's increase in 1H18 BAU net profit by 3.3% Y-o-Y to RM2.36 billion. This was achieved despite a 5.2% Y-o-Y drop in operating income due to weaker capital markets in Malaysia. The 1H18 net earnings per share ("EPS") stood at 25.4 sen, while the annualised ROE was 9.7%. The Group declared a first interim net dividend of 13.00 sen per share to be paid via cash or an optional Dividend Reinvestment Scheme ("DRS"). The total interim dividend amounts to a payment of approximately RM1.22 billion, translating to a dividend payout ratio of 51.6% of 1H18 net profits.

"We are pleased with our record net profit of RM3.29 billion, contributed partly by the RM928 million gain from the strategic realignment of our shareholding in CPAM and CPIAM, which also provided an uplift of 15bps to our CET1. Consumer banking chalked a stellar performance, posting a 34.7% Y-o-Y increase in PBT; while Commercial Banking's PBT rose by 19.9% Y-o-Y. The weaker markets in Malaysia, however, contributed to a lower PBT for Wholesale Banking," said Tengku Dato' Sri Zafrul Aziz, Group CEO, CIMB Group.

2) CIMB Group 1H18 Y-o-Y Performance (BAU basis)

CIMB Group's 1H18 operating income was 5.2% lower Y-o-Y at RM8.24 billion from a 6.1% decline in non-interest income from slower capital markets in Malaysia and a 4.8% decline in net interest income mainly from Commercial and Wholesale banking. This was offset by a RM163 million gain from the sale of 50% of CSI. Continued cost discipline brought about the 7.3% Y-o-Y decline in operating expenses, resulting in a fifth consecutive quarter of positive JAW, translating to a 1H18 CIR of 51.3%. The Group's PBT was 7.4% Y-o-Y higher at RM3.27 billion, with loan provisions declining 29.4%.

The Group's Consumer Bank PBT was 34.7% higher Y-o-Y in 1H18 at RM1,611 million, making up 49% of Group PBT. Consumer revenue growth was underpinned by good non-interest income performance, steady net interest income growth and lower provisions. The Commercial Banking PBT increased by 19.9% Y-o-Y, an encouraging sign of its regional business recalibration, as lower cost and provisions is partially offset by a decline in operating income. PBT at the Group's Wholesale Banking division was RM914 million or 26.2% lower Y-o-Y from a combination of significantly weaker capital markets and higher provisions. Group Asset Management and Investments ("GAMI") PBT improved 13.6% Y-o-Y from better performances in the public markets, in line with a 14.4% increase in assets under management. Group Funding PBT increased 26.9% Y-o-Y mainly from the RM163 million gain arising from the sale of 50% of CSI.

Non-Malaysia PBT contribution to the Group stood at 34% in 1H18, remaining the same as 1H17. Indonesia's PBT decreased 5.6% Y-o-Y to RM590 million. However, excluding FX translation effects, Indonesia's PBT expanded 8.6% Y-o-Y in line with CIMB Niaga's improving performance. Thailand's PBT contribution of RM257 million was a 50.3% Y-o-Y increase attributed to lower provisions. Total PBT contribution from Singapore was 5.1% higher Y-o-Y at RM225 million mainly from savings on the deconsolidation of CSI.

The Group's total gross loans (excluding the bad bank) grew by 3.4% Y-o-Y (+7.0% excluding FX effects), while total deposits were 1.5% higher Y-o-Y. The Group's Loan to Deposit Ratio ("LDR") stood at 94.0%, compared to 92.4% as at end-June 2017.

The Group's gross impairment ratio remained unchanged at 3.2% as at end-June 2018, with a higher allowance coverage of 106.8%. The Group's Cost-to-Income Ratio improved to 51.3% compared with 52.5% in 1H17, in line with continued cost management. The Group's Net Interest Margin ("NIM") was lower at 2.52% attributed to the contraction at CIMB Niaga.

As at 30 June 2018, CIMB Group's total capital ratio stood at 16.5% while the Common Equity Tier 1 ("CET1") capital ratio stood at 11.9%.
3) CIMB Group 2Q18 Q-o-Q Performance (BAU basis)

On a quarter-on-quarter ("Q-o-Q") basis, 2Q18 operating income was 8.5% lower at RM3.94 billion from the 26.4% and 0.2% decline in non-interest income and net interest income respectively. Consumer Banking PBT declined 10.0% Q-o-Q from lower non-interest income and higher costs in 2Q18. Commercial Banking PBT was 41.8% higher Q-o-Q due to lower costs and improved provisions. Wholesale Banking PBT was lower by 13.5% Q-o-Q largely attributed to the weaker capital markets during the period. GAMI PBT reduced by 33.3% from private markets, while the gain from the sale of 50% of CSI recognised in 1Q18 brought about the 41.3% decrease in Group Funding PBT. The Group's 2Q18 net profit was 19.4% lower Q-o-Q driven by lower operating income across all segments.

On a Y-o-Y basis, the 9.0% operating income decline in 2Q18 was attributed to a decline in non-interest income and net interest income of 16.9% and 6.0%, respectively. Consumer Banking PBT grew 20.2% Y-o-Y from sustained business momentum and better cost management. Regional Commercial Banking PBT grew 66.3% Y-o-Y from the reduction in provisions. Wholesale Banking PBT was 17.0% lower Y-o-Y mainly from Treasury & Markets and Investment Banking given the weaker capital markets. GAMI PBT was 23.1% lower Y-o-Y from a drop in both public and private markets, while Group Funding 2Q18 PBT was flat Y-o-Y. The Group's 2Q18 net profit fell 4.5% Y-o-Y to RM1.05 billion largely attributed to the weaker capital markets in 2Q18.

4) CIMB Islamic

CIMB Islamic's 1H18 PBT increased by 33.6% Y-o-Y to RM497 million, driven by strong 25.8% operating income growth amid healthy balance sheet growth. CIMB Islamic's gross financing assets increased by 30.9% Y-o-Y to RM66.9 billion, accounting for 20.1% of total Group loans. Total deposits increased by 20.0% Y-o-Y to RM68.9 billion.

5) Outlook

"The Group is relatively cautious on 2018 growth prospects in view of rising global trade tensions and market uncertainties. Nevertheless, we remain focused on achieving our T18 targets, subject to recovery of capital markets, and continued improvement in asset quality across Indonesia, Thailand and Singapore. CIMB Malaysia is expected to track the domestic economy and investment climate. CIMB Singapore's prospects will be driven by regional economic conditions. CIMB Thai and CIMB Niaga's business recalibration initiatives are progressing well."

"We are finalizing our next mid-term growth plan which will be strongly premised on customers, people and sustainability, among others. We have already begun embedding sustainability principles into our operations Group-wide, and this is complemented by CIMB's founding membership of the United Nations' (UN) Environment Programme Finance Initiative Principles for Responsible Banking (UNEP-FI). Coupled with our strengthened capital position, disciplined cost management and continued focus on customer experience, we are confident that we will be able to serve our stakeholders not just effectively, but also sustainably," continued Tengku Zafrul.


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