CIMB targets 6% rise in FY18 lending

KUALA LUMPUR: CIMB Group Holdings Bhd, which posted a 25.6% jump in its net profit for the financial year ended Dec 31, 2017 (FY17), is targeting a loan growth of 6% for FY18 despite posting a weaker-than-expected loan growth of 0.2% in FY17 that came in below its target of 7%.
Group CEO Tengku Datuk Seri Zafrul Aziz said its FY17 loan growth of 0.2% was dragged down by its Indonesian business, the second largest market after Malaysia in terms of balance sheet, as well as impact from the foreign exchange (forex). Excluding forex effects, loan growth would have been 3.1%.
The group’s loan loss charge at 0.69% also missed its target of 0.60%-0.65%, mainly due to higher-than-expected provisions in Singapore and Thailand.
“The worse is over for us in those markets. We’ve seen the books and the books look good for this year. What’s important is to make sure the loan growth comes in for those countries,” he told reporters after announcing its financial results today.
But loan growth for its Malaysian business exceeded the industry’s loan growth in FY17, coming in at 6.5%.
Zafrul said its FY18 loan growth target of 6% will be largely driven by Malaysia, which is expected to see its loan growth strengthen to 8% this year, attributable to the consumer and corporate segments. Loan growth in Indonesia is also expected to come in at mid single digit in FY18 from 2.8% in FY17 while Thailand and Singapore are expected to post a high single digit loan growth this year, from 2.9% and -2.7% respectively in FY17.
“We’re optimistic about 2018. We see momentum in Malaysia and improvement in asset quality and loan growth in Indonesia, Thailand and Singapore,” said Zafrul.
Despite the group’s weak loan growth in FY17, he said that the bank’s revenue increased 9.7% while net interest income grew 8.4%.
“The numbers are still showing improvement,” Zafrul said.
For FY18, it is also targeting for the group’s cost-to-income ratio to improve to 50%, from 51.8% in FY17 and for loan loss charge to improve to 0.55%-0.60%. The group’s net interest margin (NIM) was unchanged at 2.63% in FY17 in line with continued liability management, but it is expecting a NIM compression of 5-10bps mainly from Indonesia.
CIMB’s net profit for the fourth quarter ended Dec 31, 2017 jumped 24.1% to RM1.06 billion from RM854.39 million a year ago thanks to its better overall performance. Revenue increased 4.7% higher at RM4.52 billion compared with RM4.31 billion in the previous year’s corresponding quarter underpinned by the 17.3% improvement in non-interest income.
For FY17, CIMB’s net profit rose 25.6% to RM4.48 billion from RM3.56 billion a year ago underpinned by growth in operating income and improved cost management. Revenue grew 9.7% year-on-year to RM17.63 billion from RM16.07 billion largely driven by a 12.8% growth in non-interest income, in line with better capital market activity and improved fee income and an 8.4% growth in net interest income.
The group declared a second interim net dividend of 12 sen per share. For FY17, the total dividend amounted to 25 sen or RM2.28 billion, translating to a dividend payout ratio of 51% of FY17 profits.