CIMB's Q2 profit rises 26.3%, on track to achieve 6%-7% loan growth this year

KUALA LUMPUR: CIMB Group Holdings Bhd, whose net profit rose 26.31% in the second quarter, said it is on track to achieve its key financial targets for the year, including a loan growth of 6-7%, driven by its Malaysian operations.
“We are quite optimistic on the performance for the second half of 2017 (2H17) if you look at the expected gross domestic product (GDP) growth for Malaysia as well as Indonesia, and we expect gradual improvement in Singapore and Thailand,” said group chief executive Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
“We are also quite positive on the improvement in regional activities as well as capital markets. We are going to continue to chase growth but we are mindful of the importance of managing cost and also our asset quality across our businesses … I am cautiously optimistic that CIMB is on track to meet its key financial targets for 2017,” he told reporters at a briefing yesterday.
Tengku Zafrul said loan growth for the Malaysian banking industry will be in the high single-digit range, which CIMB will track. For 1H17, CIMB’s Malaysian loan growth was up 10% year-on-year while Indonesia and Singapore saw 2.8% and 1.1% growth respectively. Thailand saw a contraction of 1.7%.
Gross loans across the three segments namely, consumer, commercial and wholesale banking, grew 8.2% to RM319.2 billion from RM294.9 billion a year ago while deposits grew 9.6% to RM348.9 billion from RM318.4 billion a year ago.
Tengku Zafrul said loan growth in Malaysia has been strong this year and has always been the key driver for the group but Indonesia, Thailand and Singapore have been facing challenges.
“In Singapore the economy has moderated somewhat due to the oil and gas (O&G) sector, so we don’t foresee strong loan growth there. In Indonesia, we expect loan growth this year to be better than last year for CIMB, and in Thailand we expect loan growth to be slightly muted as we recalibrated our commercial banking business. But if you look at the other segments both in retail and corporate, loan growth in Thailand is expanding,” he added.
Meanwhile, net interest margin improved to 2.71% for 1H17 and is expected to remain at the same level till year-end.
On the impact of O&G on asset quality, Tengku Zafrul said it does not expect any material impact as the group’s overall exposure to the sector is 2.5%, of which the bulk is in Malaysia (about 85%).
Group CFO Shahnaz Jammal said the exposure to O&G in Singapore has fallen over the last 12 to 18 months. While there are still some growth challenges in Singapore, the numbers are very small at group level.
For the second quarter ended June 30, 2017, net profit rose 26.31% to RM1.10 billion from RM872.83 million a year ago while revenue rose 10.87% to RM4.33 billion from RM3.90 billion a year ago.
For 1H17, net profit rose 35.34% to RM2.28 billion from RM1.69 billion a year ago while revenue went up 13.89% to RM8.69 billion from RM7.63 billion.
The group declared a first interim net dividend of 13 sen per share to be paid via cash or an optional dividend reinvestment scheme. The total interim dividend amounted to RM1.18 billion, translating to a dividend payout ratio of 51.6% of 1H17 profits.
CIMB’s share price rose 0.89% to close at RM6.78 yesterday with 6.73 million shares traded. Its market capitalisation stood at RM60.65 billion.