KUALA LUMPUR (Aug 30): CIMB Group Holdings Bhd is poised to exceed all of its financial targets set for 2022 given the positive performance achieved in the first half ended June 30, 2022 (1HFY22), said group chief executive officer Datuk Abdul Rahman Ahmad.

Nevertheless, the group did not revise these targets as it maintained a cautious stance for 2HFY22 in view of various macroeconomic headwinds, Abdul Rahman told reporters at a virtual briefing in conjunction with the quarterly results release on Tuesday (Aug 30).

"We are hopeful of continued economic growth in markets we operate given the resumption of economic activity across the region with inflows of investment," he said.

CIMB, the country's second-largest bank by asset size, recorded a return on equity (ROE) of 9.1% in 1HFY22, compared to its FY22 ROE target of 7.5%-8%.

"We saw positive performance across all business segments and geographies [in 1HFY22], arising from high operating income, continued cost discipline and significantly lower provisions," said Abdul Rahman.

The group's operating income was largely driven by strong loan growth of 6.8% in 1HFY22, which was already higher than the group's targeted 5%-6% growth this year.

Nonetheless, Abdul Rahman expects demand for loans to moderate in 2HFY22 amid a rising interest rate environment.

"It is natural that with rising interest rates, demand for loans will be affected, but at the moment, [for] 1H, both ours as well as industry loan growth have been very strong, predominantly caused by the impact of recovery or resumption of economic activities.

"But we expect this to probably be moderated. I wouldn't call it severely affected, as interest rates rise and cost of borrowings are more expensive," he said.

In terms of provisions, group chief financial officer Khairul Rifaie said expected credit losses are likely to "remain broadly stable" for the remainder of 2022.

"For the remainder of 2022, we expect credit costs of 50-60 bps (basis points). In 2Q (second quarter), on an annualised basis, we recorded a credit cost of 49 bps. So if you look at it on a sequential quarter-on-quarter basis, we expect provisions to remain broadly stable," he said, adding that management is expecting another two more overnight policy rate hikes of 25 bps each in September and November.

CIMB's provisions for 1HFY22 declined 36% to RM905.61 million from RM1.42 billion a year ago.

"Total provisions decreased due to recoveries from Singapore commercial business, lower legacy credit and Covid-19-related provisions in Malaysia, as well as lower underlying consumer provisions," said Abdul Rahman.

Abdul Rahman also highlighted that the group's 1HFY22 cost-to-income (CTI) ratio was the lowest in over five years at 46.5%, versus FY22 target of below 49%. The group's CTI ratio was 48.6% in FY21 and 51.7% in FY20.

Is CIMB reducing stake in JV with China Galaxy Securities?

When asked whether CIMB is looking to exit its stockbroking joint venture (JV) with China Galaxy Securities Co Ltd after reducing its shareholding in the JV to 25%, Abdul Rahman merely said "on our part it is not about whether we are exiting, it is whether our partner would like to increase their stake in the JV".

Abdul Rahman said this is part of the partnership arrangement whereby China Galaxy is entitled to exercise its rights under a call option to increase its shareholding in the JV.

"The price was governed under the call option. It is based on the same term when we sold 50% [stake] to China Galaxy back in 2019," he said.

According to CIMB's 2021 annual report, the divestment of 25% stake in the partnership in December last year raised proceeds of US$170.5 million (RM763.08 million).