CIMB 1Q net profit shrinks 42% on-year on one-off items booked a year ago and prosperity tax

KUALA LUMPUR (May 31): CIMB Group Holdings Bhd’s net profit for the first quarter ended March 31, 2022 (1QFY22) tumbled 41.93% to RM1.43 billion from RM2.46 billion a year ago, mainly due to one-off non-recurring items booked a year ago and the recognition of the prosperity tax.

“On a reported basis that includes one-off non-recurring exceptional items, CIMB group’s operating income and net profit declined by 19.8% and 41.9% year-on-year (y-o-y) to RM4.74 billion and RM1.43 billion respectively. The contraction was mainly due to the revaluation gain of RM1.16 billion on the deconsolidation of TNG Digital in 1QFY21 as well as the impact of Cukai Makmur in 1QFY22,” the bank’s bourse filing showed.

As a result, earnings per share dropped to 13.96 sen in the quarter under review compared with 24.76 sen in 1QFY21.

On a quarterly basis, however, CIMB recorded stronger performance with reported operating income increasing by 3.3% to RM4.74 billion, from RM4.6 billion whilst reported net profit grew by 67% quarter-on-quarter (q-o-q) to RM1.43 billion from RM854.51 million. This translates to a reported return-on-equity (ROE) in 1QFY22 of 9.6%, restoring the group back to pre-pandemic levels of performance, it added.

Its quarterly revenue shrank 19.84% y-o-y to RM4.74 billion, from RM5.91 billion a year before; however, it inched up 3.26% q-o-q from RM4.59 billion. The board did not declare any dividend for the quarter under review.

Excluding the one-off items, CIMB said it sustained its core pre-provisioning operating profit at RM2.51 billion whilst core net profit positively grew by 16% y-o-y to hit RM1.55 billion, from RM1.34 billion. The performance translates to a core annualised ROE of 10.5% and core earnings per share of 15.2 sen.

Core operating income for 1QFY22 was flat y-o-y but grew 2.9% q-o-q reaching RM4.74 billion. Out of this, net interest income (NII) grew by 3.8% y-o-y to RM3.55 billion, despite a marginally lower net interest margin (NIM) of 2.45% mainly due to the group’s Indonesia business. Core non-interest income (NOII) declined by 10.9% y-o-y to RM1.19 billion due to weaker global investment environment.

Loan growth regained momentum, increasing by 4.9% y-o-y on the back of economic recovery positively impacting most markets and segments, especially in consumer banking where loans grew 6.9% y-o-y.

Deposits also increased by 7% driven by strong current account savings account (CASA) growth of 9.9% y-o-y, which translates to an improvement in CASA ratio from 42.3% recorded in March 2021 to 43.5% in March 22. The group’s capital position remains strong and above target with its common equity tier 1 (CET1) ratio at 14.5% as at March 22, up from 12.9% as at March 21 and 14.5% as at December 2021.

The group’s cost-to-income ratio (CIR) improved to 47% compared to 51.6% in 4QFY21 and 47.2% in 1QFY21 as core operating expenses decreased by 0.8% y-o-y from continued stringent cost controls.

Total provisions also declined significantly by 43.9% y-o-y from RM756 million recorded in 1QFY21 to RM424 million in 1QFY22. This was due to improved asset quality on the back of positive migration of customers from repayment assistance programmes, as well as writebacks from the recovery of legacy credits.

In a statement, CIMB group chief executive officer Datuk Abdul Rahman Ahmad said the strong performance seen in the first quarter is a positive reflection of the economic recovery across its markets, as well as the growing momentum in all segments of its business.

Steady topline growth, sustained cost controls and reduction in provisions contributed to improved profitability. This was achieved despite the challenging investment environment as the world adjusts to geopolitical developments which have created macroeconomic headwinds and financial market volatility, he added.

“Our capital and liquidity positions as well as asset quality continue to strengthen, demonstrating the strength and resilience of our business franchise amidst the current operating environment. We are particularly encouraged to see the positive traction in loan growth as the strategy to reshape our portfolio is starting to bear results.

“At the same time, ongoing cost optimisation efforts have contributed to lower operating expenses and improvement in CIR, notwithstanding higher expenses related to technology and operational investments. We expect to spend RM1 billion in FY22 to drive further digitalisation as well as improve technology and operational resiliency,” he further added.

The group is optimistic of an improved financial performance in 2022 in view of business expansion on the back of anticipated regional economic recovery.

It said it will continue to emphasise asset quality and credit risk management across segments and geographies, particularly within pandemic-impacted customers and sectors.

CIMB’s share price settled 10 sen or 1.98% higher at RM5.15 at market close, with a market capitalisation of RM53.94 billion.