CIMB Group announces record quarterly net profit of $275.9 million (RM1.18 billion) for 1Q 17

May 24, 2017
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CIMB Group announces record quarterly net profit of $275.9 million (RM1.18 billion) for 1Q 17

Record quarterly net profit of RM1.18 billion in 1Q17 with annualised ROE of 10.3%
1Q17 PBT improved 43.7% Y-o-Y to RM1.61 billion, on the back of 17.1% Y-o-Y operating income growth and lower provisions
Cost-to-Income ratio improved to 52.6% for 1Q17 (cf. 57.4% in 1Q16) with operating expenses staying under control
Improved capital markets resulted in 32.3% Y-o-Y improvement in non-interest income
Loans grew 12.2% on the back of Malaysia loans expanding 11.8% Y-o-Y in 1Q17
CASA growth momentum sustained with CASA ratio of 36.0%, with CIMB Niaga’s CASA ratio improving to 55.7%
Group’s CET1 ratio strengthened to 11.5% as of 31 March 2017

Summary

CIMB Group Holdings Berhad (“CIMB Group” or the “Group”) today reported a Profit Before Tax (“PBT”) of RM1.61 billion for the first quarter of 2017 (“1Q17”). On a year-on-year (Y-oY) basis, the Group’s 1Q17 operating income expanded 17.1%, translating to a 30.0% Y-o-Y improvement in pre-provisioning operating profit (”PPOP”) and a 45.0% Y-o-Y growth in Net Profit to RM1.18 billion. The 1Q17 net earnings per share (“EPS”) stood at 13.3 sen, while the annualised 1Q17 net return on average equity (“ROE”) was 10.3%.

“We had a good start to 2017, recording our highest ever quarterly net profit of RM1.18 billion in 1Q17 in tandem with the gradually improving regional economic conditions and capital market activity. Our main business units are gaining traction, with cost management initiatives continuing to show progress and asset quality showing sustained improvement. Better capital and balance sheet management has brought about more focused growth, improved margins, a healthier CASA ratio and a strengthened capital position," said Tengku Dato’ Sri Zafrul Aziz, Group Chief Executive, CIMB Group.

CIMB Group 1Q17 Y-o-Y Results

CIMB Group’s 1Q17 operating income grew 17.1% Y-o-Y to RM4.36 billion largely driven by a 32.3% growth in non-interest income in line with improved capital market activity. 1Q17 net interest income rose 11.5% from loans growth and improvement in Net Interest Margin (“NIM”), Operating expenses were 7.4% higher Y-o-Y but was only 3.9% higher after excluding foreign currency translation effects, as the Group’s cost management initiatives continue to show progress. The positive JAW brought about the 30.0% improvement in the Group’s PPOP. The Group’s PBT was 43.7% higher at RM1.61 billion, with loan provisions declining 8.8% Y-o-Y.

The Group’s Regional Consumer Bank PBT was 0.5% higher Y-o-Y in 1Q17 at RM561 million, making up 35% of Group PBT. While revenue growth was healthy and costs kept in check, the relatively flat PBT performance was attributed to higher provisions from the credit cards and auto finance business in Indonesia. The Regional Commercial Banking business continues to expand but the 7.8% lower PBT was due to the higher Y-o-Y provisions in Thailand. The Group’s Regional Wholesale Banking PBT was 117.0% higher Y-o-Y at RM727 million from a combination of increased capital market activity and a stronger Corporate Banking performance with loans growth and lower provisions. Group Asset Management and Investments (“GAMI”)’s PBT was 53.8% lower Y-o-Y without the equity accounting of the Bank of Yingkou, pending completion of its proposed sale. Group Funding churned a PBT of RM148 million from a loss in 1Q16, arising from lower funding costs and FX translation gains.

The Group’s total gross loans (excluding the bad bank) grew by 12.2% Y-o-Y, while total deposits grew 10.8% Y-o-Y. The Group’s 1Q17 loan to deposit (“LDR”) ratio stood at 91.7% compared to 90.6% in 1Q16. The Group’s gross impairment ratio was higher at 3.2% as at end-March 2017 from 3.0% in March 2016, with an allowance coverage of 79.6%. The Group’s Cost-to-Income ratio improved to 52.6% compared with 57.4% in 1Q16, in line with the stronger revenues and controlled cost increases. The Group’s NIM improved to 2.72% for 1Q17 from better liability management in Indonesia, Thailand and Singapore.

CIMB Group 1Q17 Q-o-Q Performance

On a quarter-on-quarter (“Q-o-Q”) basis, 1Q17 operating income was 1.1% higher at RM4.36 billion, with net interest income growing 1.0% and a 1.4% growth in non-interest income. Consumer Banking PBT was 1.2% lower Q-o-Q largely due to the Indonesi bancassurance fees recognised in 4Q16. Regional Commercial Banking’s PBT increased 494.4% Q-o-Q due to the higher provisions in Thailand and Singapore in 4Q16. Wholesale Banking PBT improved 30.5% Q-o-Q underpinned by a stronger performance in corporate banking and improved capital market activity. GAMI PBT was 63.6% higher Q-o-Q due to absence of investment impairments, while Group Funding PBT rose 46.5% due to the goodwill impairment in 4Q16 and FX gains. The Group’s 1Q17 net profit was 38.2% higher Q-o-Q at RM1.18 billion predominantly due to the significantly lower loan loss provisions across all operating countries.

CIMB Islamic Bhd

CIMB Islamic’s 1Q17 Y-o-Y PBT increased by 1.1% to RM193 million from improved performance in the Consumer segment. CIMB Islamic’s gross financing assets increased by 18.4% Y-o-Y to RM49.5 billion, accounting for 15.3% of total Group loans. Total deposits increased by 25.7% Y-o-Y to RM54.8 billion.

Outlook

“Our 1Q17 results are testament to the stronger foundations that we have built since we embarked on our T18 Strategy. The strong start to the year also provides the impetus for us to continue embedding the 5C’s – capital, cost, culture, customer experience and compliance – across all our T18 programmes. We will continue to keep a tight rein on cost, strive to enhance operating income whilst expecting improvement in asset quality.

“Looking ahead, the Group is cautiously optimistic for the rest of 2017, with more stable economic conditions, increased regional activity, improved capital markets and declining provisions across our key geographies. The Group is currently on track to achieve its key financial targets for 2017,” said Tengku Zafrul.

Re-disseminated by The Asian Banker