KUALA LUMPUR – CIMB Group Holdings Bhd, expects its loan growth and return on equity (ROE) to come in below its original 2016 target this year.
Group chief executive Tengku Datuk Seri Zafrul Aziz said it is harder to achieve its earlier loan growth and ROE target, both 10%, due to external macroeconomic conditions and slowing gross domestic product growth in the region.
“We forecast a 6-7% loan growth this year while we think ROE will be around the consensus 9%,” he told a press conference after announcing CIMB’s financial results for the first six months (1H16) here yesterday.
CIMB’s 1H16 loan growth was 6.6% year-on-year driven by consumer banking. Its annualised 1H16 ROE was 8.1%.
Zafrul said all other targets like capital, cost and dividend payout remain on track.
CIMB expects better performance in 2H16, with cost management, asset quality and governance remaining as core management focus areas.
It remains upbeat on CIMB Niaga’s performance, which is expected to improve progressively, although the local operating environment may continue to be challenging. CIMB Malaysia and CIMB Singapore’s performance is expected to be subdued in line with the slower economic environment in both countries. CIMB Thai will continue to focus on asset quality and operational reorganisation.
Zafrul said Thailand will see an uptick in provisions from the SME segment, while he is optimistic that provisions for Indonesia will be lower this year having already seen lower provisions in 1H16. The provisions in Malaysia are expected to remain low.
On CIMB’s exposure to oil and gas sector loans, Zafrul said it is less than 3% of its total loan portfolio and below 9% for the commodity sector.
Zafrul said CIMB has closed 22 branches since August last year, out of 23 planned for Malaysia this year, a move he said is consistent with the industry in optimising branch efficiency for cost savings.
Meanwhile, close to 20% of CIMB shareholders have opted for monetisation for the dividend in specie involving the distribution of CIMB Niaga shares. SunBiz had highlighted the pickle shareholders of CIMB were in, having to decide between an almost 50% discount (at that point) for dividend shares under the monetisation offer or keeping the shares to be dealt with later at a cost of at least RM100 per transaction. Transfer of the dividend shares will be done today.
For the second quarter ended June 30, 2016, CIMB’s net profit rose 36% to RM872.83 million from RM639.75 million a year ago, mainly due to its consumer banking business that was fuelled by regional consumer loan growth, lower provisions and overhead costs.
Revenue grew marginally to RM3.9 billion compared with RM3.83 billion in the previous year’s corresponding quarter.
For the six months period, CIMB’s net profit rose 38% to RM1.69 billion from RM1.22 billion a year ago underpinned by improvement in Indonesia and sustained cost management initiatives.
Revenue grew to RM7.63 billion compared with RM7.51 billion in the previous year’s corresponding period. – Sundaily