CIMB Group announces RM3,914 million profit before tax for FY2015

February 25, 2016
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CIMB Group announces RM3,914 million profit before tax for FY2015

9.8% Y-o-Y growth in FY15 operating income coupled with well-contained operating expenses brought about a pre-provision operating profit growth of 19.3% Y-o-Y
Cost to income ratio improved by 350bps to 55.6% for FY15 from the structural cost management initiatives and strict cost discipline
Provisions remained elevated from Indonesia and Thailand, impacting the FY15 net profit
4Q15 net profit improved 237% Y-o-Y from higher operating income and lower provisions
FY15 annualised ROE stood at 8.6% excluding restructuring costs
Excluding FX fluctuations, FY15 loan growth was 6.6% Y-o-Y, with deposits increasing 6.9%
Significantly strengthened capital position with CET1 at 10.3% as of end December 2015
Second interim dividend of 11.0 sen, bringing FY15 dividend payout to 41.9%

1) Summary
CIMB Group Holdings Berhad (“CIMB Group” or the “Group”) today reported a Profit Before Tax (“PBT”) of RM3,914 million for financial year 2015 (“FY15”), translating to a net earnings per share (“EPS”) of 33.6 sen. After excluding exceptional expenses from restructuring and the Mutual Separation Scheme (“MSS”), the Business As Usual (“BAU”) pre-provision operating profit grew 19.3% Y-o-Y from a 9.8% growth in operating income coupled with a 3.3% (-0.5% excluding FX) growth in operating expenses. With the increased Y-o-Y provisions, the FY15 BAU net profit grew 8.0% Y-o-Y with a net return on average equity (“ROE”) of 8.6%. The Group declared a second interim net dividend of 11.00 sen per share to be paid via cash or an optional Dividend Reinvestment Scheme (“DRS”). For FY15, the total dividends amounted to 14.00 sen or RM1,193 million, translating to a dividend payout ratio of 41.9% of FY15 profits.

"Despite the difficult operating conditions in 2015, we are heartened by the numerous positives we can draw upon, including reporting our highest ever operating income and the continued strong growth shown by all business segments, in particular our regional Consumer and Commercial Banking businesses. Further, in Investment Banking, we continue to defend our market share.

CIMB Group navigated a challenging 2015 with prudence through the implementation of our business recalibration strategies and very strong focus on cost and capital management. This is reflected in the lower cost structure of the Group, with a reported cost to income ratio of 55.6% and the strengthened CET1 ratio of 10.3%," said Tengku Dato’ Sri Zafrul Aziz, Group Chief Executive, CIMB Group.

2) CIMB Group FY15 Y-o-Y Results
For comparative purposes, the Y-o-Y performance is based on BAU numbers for FY15. CIMB Group’s FY15 operating income grew 9.8% Y-o-Y to RM15,395 million underpinned by a 15.8% improvement in non-interest income and a 7.4% growth in net interest income. Operating expenses increased by a smaller 3.3% Y-o-Y largely due the foreign currency translation effects which raised both personnel and administrative & general expenses. This brought about the 19.3% improvement in the Group’s Pre-Provisioning Operating Profit (“PPOP”). The Group’s PBT was 7.5% higher at RM4,598 million, partially offset by increased corporate and commercial loan provisions.

The Group’s regional Consumer Bank PBT increased by 18.1% Y-o-Y in FY15 to RM1,726 million, making up 38% of Group PBT. Contributions were stronger fuelled by the consumer operations in Malaysia, Indonesia and Singapore. The regional Commercial Banking PBT was 6.3% lower Y-o-Y at RM666 million largely attributed to higher provisions in Indonesia and Thailand. The Group’s Regional Wholesale Banking PBT improved by 14.4% Y-o-Y to RM1,686 million from better performances at Corporate Banking and Investment Banking, while Treasury & Markets was softer on the back of weaker capital markets. Group Asset Management and Investments (“GAMI”)’s PBT was 17.8% lower Y-o-Y due to the large gains from divestments in FY14, while Group Funding PBT declined 17.2% Y-o-Y due to higher cost of funds and lower investment returns.

Non-Malaysia PBT contribution to the Group was lower at 21% in FY15 compared to 28% in FY14, principally due to the 53.4% Y-o-Y decline in Indonesia’s PBT to RM393 million from lower CIMB Niaga earnings. Thailand's PBT contribution was also 31.1% lower Y-o-Y at RM153 million given the higher provisions in FY15. Total PBT contribution from Singapore was 9.9% higher at RM378 million from continued performance improvement at the bank.

The Group’s total gross loans (excluding the bad bank) expanded 12.8% Y-o-Y or 6.6% excluding FX fluctuations. Total deposits grew 12.6% Y-o-Y or 6.9% excluding FX fluctuations. The Group’s loan to deposit (“LDR”) ratio remained relatively unchanged at 92.9% compared to 93.0% previously.

The Group’s gross impairment ratio reduced to 3.0% as at December 2015 from 3.1% in December 2014, with a higher allowance coverage of 84.7% as at December 2015. The Group’s BAU cost to income ratio improved to 55.6% compared with 59.1% in FY14, as the cost management initiatives continue to gain traction. The Group’s Net Interest Margins
(“NIM”) were lower at 2.66% driven mainly by the higher cost of deposits in Malaysia.

As at 31 December 2015, CIMB Group’s total capital ratio stood at 15.2% while the Common Equity Tier 1 (“CET1”) capital ratio stood at 10.3%.

3) CIMB Group 4Q15 Performance
On a Q-o-Q basis, 4Q15 operating income grew 5.2% to RM4,041 million arising from a 14.7% growth in non-interest income and a 1.6% increase in net interest income. The Consumer Banking and Commercial Banking PBT were 3.8% and 10.3% lower respectively due to higher provisions during the quarter. Wholesale Banking PBT grew 4.2% on the back of a stronger performance in Treasury & Markets and Investment Banking in 4Q15. 4Q15 BAU net profit was 5.8% lower Q-o-Q at RM850 million attributed to the higher provisions.

On a Y-o-Y basis, 4Q15 operating income was 14.0% higher at RM4,041 million on the back of a 9.6% increase in net interest income and a 25.4% growth in non-interest income. The Consumer Banking PBT expanded by 22.4% Y-o-Y due to asset growth across all geographies and better cost controls. Wholesale Banking PBT posted a RM468 million PBT in 4Q15 compared to a loss in 4Q14 owing to lower Corporate Banking provisions and improved Treasury & Markets and Investment Banking operations. Commercial Banking PBT was 7.9% lower due to higher provisions in 4Q15. As a result, the 4Q15 BAU net profit of RM850 million was 237.3% higher Y-o-Y from the RM252 million in 4Q14.

4) CIMB Islamic
CIMB Islamic’s FY15 Y-o-Y PBT increased by 2.9% to RM541 million from improved performance in the Consumer segment. CIMB Islamic’s gross financing assets increased by
10.8% Y-o-Y, accounting for 13.6% of total Group loans. Total deposits grew by 7.1% Y-o-Y to RM44.2 billion.

5) Target 18 (“T18”) And Key Organisation Changes
On 26 February 2015, Tengku Dato’ Sri Zafrul Aziz was confirmed as Group Chief Executive Officer (“CEO”). Dato’ Sri Nazir Razak took over as Chairman of CIMB Group on 1 September 2014. On 20 July 2015, CIMB Group announced the appointment of Datuk Mohd Nasir Ahmad and Dato’ Lee Kok Kwan as Independent Director and Non-Executive Non- Independent Director respectively.

On 6 February 2015, CIMB Group outlined its new T18 plans and key organisation changes, with a mid-term target of achieving an ROE of 15%, CET1 ratio of over 11%, a cost to income ratio of below 50% and a 60% consumer banking income contribution by end-2018. The reorganisation exercise saw the creation of new regional divisions and key management changes across the Group. On 12 March 2015, the Group announced the appointment of Effendy Shahul Hamid as CEO, Group Asset Management & Investments and Kwan Keen Yew as Group Chief Compliance Officer. On 1 June 2015, Tigor M. Siahaan was appointed as President Director of CIMB Niaga. On 4 January 2016, Mohamed Rafe bin Mohamed Haneef was appointed as CEO/ED of CIMB Islamic Bank and CEO, Group Islamic Banking. On 20 January 2016, Tengku Dato’ Sri Zafrul Tengku Abdul Aziz was appointed as CEO of CIMB Bank Berhad.

As part of the T18 Cost and Productivity initiative, the Group closed its offices in Sydney and Melbourne in Australia, in line with the objective of reducing its Asia Pacific investment banking and equities business related operating costs. On 15 May 2015, the Group announced a voluntary MSS to employees in Malaysia and Indonesia as part of the realignment of cost structures and operating efficiencies. On 1 July 2015, the MSS was completed with a total of 3,614 applications approved (1,908 in Malaysia and 1,706 in Indonesia). Overall, the Group’s staff strength decreased by 8.6% Y-o-Y from a combination of the MSS and natural attrition.

6) Outlook
“In line with further deceleration in growth and volatility in markets, it was timely that we embarked on our Group-wide T18 recalibration initiative. This has allowed us to enter 2016 on a firmer footing; with a lower cost structure and an improved capital position. Looking ahead, by country, we expect CIMB Malaysia and Singapore to remain solid. In Indonesia, we expect performance to improve albeit on lower provisions while Thailand’s asset quality will be closely monitored amidst economic uncertainty.

The Group’s focus for the year will be the execution of key T18 projects in areas like Transaction Banking, Commercial Banking and Digital Banking with continued vigilance on asset quality, cost management and capital management,” said Tengku Zafrul.

Re-disseminated by The Asian Banker