(Frem left): CIMB group chief financial officer Khairul Rifaie and group CEO Datuk Abdul Rahman Ahmad at the group’s FY2022 virtual press conference

KUALA LUMPUR (Feb 28): CIMB Group Holdings Bhd’s net profit jumped 26.6% to RM5.44 billion for the year ended Dec 31, 2022 (FY2022) versus RM4.29 billion posted a year ago, on the back of stronger operating income from robust loan growth and net interest margin (NIM) expansion.

The stronger net profit was also attributed to stringent cost management, lower provisions from prudent risk management, recoveries and portfolio de-risking, the bank said in a filing with Bursa Malaysia.

Revenue grew 1.6% to RM19.84 billion from RM19.51 billion reported in FY2021, according to the group's bourse filing.

For the fourth quarter, CIMB reported a 55% increase in net profit to RM1.32 billion versus RM854.51 million in 4QFY2021, on the back of strong operating income growth and significantly lower provisions.

Quarterly revenue grew 13.8% to RM5.21 billion from RM4.58 billion in 4QFY2021.

CIMB said its core operating income for FY2022 rose 8% to RM19.84 billion with net interest income (NII) growing by 8.6%, driven by strong loan growth and improved NIM.

Core non-interest income (NOII) for the year also strengthened, growing by 6% to RM4.68 billion from stronger fee income and higher asset recoveries.

CIMB’s total gross loan growth momentum continued, rising 7.7% from FY2021, driven by stronger demand across key markets and segments, while total deposits grew by 4.6%.

However, total current account and savings account (CASA) contracted slightly by 1.8% from expected attrition in line with post-pandemic economic activity growth, leading to a CASA ratio of 39.9% as at December 2022.

CIMB proposed an all-cash second interim dividend of 13 sen per share, bringing the total dividend for FY2022 to 26 sen for a payout ratio of 50.5% based on the reported net profit.

"Core operating expenses rose only by 3.2% to RM9.23 billion enabling our core cost to income ratio (CIR) to improve by 210 bps year on year to a record low of 46.5% in FY2022," the group said.

The group’s total provisions declined significantly by 31.5% due to lower Covid-19 related provisions, macroeconomic factors and overlays, as well as higher writebacks.

CEO: Performance exceeded targets across all profitability metrics

CIMB group chief executive officer Datuk Abdul Rahman Ahmad said the FY2022 performance exceeded targets across all profitability metrics, including return on equity (ROE) and CIR.

"The group continues to be well capitalised as its Common Equity Tier 1 (CET1) ratio remained strong at 14.5% as at Dec 22, exceeding our target.

“The strong performance is a testament to the progress made under its mid-term Forward23+ strategic plan, where the group has been reshaping its portfolio and making focused investments into profitable areas,” Abdul Rahman said at a media briefing on Tuesday (Feb 28).

He added the group achieved meaningful profit growth in the consumer, commercial, wholesale and CIMB digital assets & group funding segments, as well as the key markets of Malaysia, Indonesia, Singapore and Thailand.

Meanwhile, the group expects its NIM to contract by five to 10 basis points in 2023 as competition among peers is expected to intensify in the deposit segment.

Its group chief financial officer Khairul Rifaie said the bank will continue to strengthen the deposit and CASA proposition.

“In 2022, our NIM expanded by 6 basis points, to 2.51% and driven mainly by two countries, Malaysia and Singapore, which benefited on the rate rises. It is also due to timing of repricing of our loans versus repricing our deposits.

“Going into 2023, we do expect pressure on margin and deposits to start to reprice, and also deposit competition to start intensifying in all our key operating markets. So we expect overall NIM for the group to contract by 5 to 10 basis points,” he said.

Abdul Rahman added that the deposit competition is very much expected due to higher liquidity among consumers looking to take advantage of the growing economy.

“All banks recognise that deposit competition intensifies partly because the economy opens up. The consumers are effectively utilising their liquidity to take advantage of the economic growth. In this particular expectation this is why our core focus in 2023 is really to strengthen and expand our CASA and deposit,” he said.

However, he said the bank is also focused on prudently managing risk given elevated interest rates.

“There is some impact on our customers servicing their loan. However, early indicators showed that this is very much well managed by the industry,” he added.

In the last Monetary Policy Committee meeting in January, Bank Negara Malaysia decided to maintain the overnight policy rate at 2.75%, the first time the central bank stayed put in hiking its benchmark interest rate since May last year.

On the banking group’s gross impaired loans (GIL) ratio, Abdul Rahman said it was showing improvement at the group and Malaysia levels.

“Going forward, we do expect GIL to remain broadly stable at the group level to be around the 3% to 3.5%, and similarly for Malaysia we do expect that to remain broadly stable in 2023 around 2% to 2.2%,” he added.

CEO declines to comment on KAF IB stockbroking business acquisition

Abdul Rahman refused to comment on a report that CIMB is seeking to acquire KAF Investment Bank Bhd’s (KAF IB) stockbroking business.

“We do not comment on any market rumours or speculation. We value our current partnership with CGS where we continue to own a residual 25% stake. We are very happy with what we have achieved together and growing the segment regionally,” said Abdul Rahman, referring to the group's CGS-CIMB Securities joint venture with China Galaxy Securities Co Ltd (CGS).

The Edge Malaysia weekly, citing sources close to the matter, previously reported that CIMB and CGS will soon be ending their equity partnership as CGS is expected to exercise a call option to take full control of CGS-CIMB Securities.

The report said CIMB wished to acquire KAF IB’s stockbroking operations so that it will continue to have a domestic stockbroking business once it exits the joint venture.

KAF IB’s stockbroking business is undertaken by its subsidiary, KAF Equities Sdn Bhd (formerly known as KAF-Seagroatt & Campbell Sdn Bhd), one of the oldest brokerages in the country.

Shares of CIMB closed 1.26% or seven sen higher at RM5.61 on Tuesday, giving the group a market capitalisation of RM59.83 billion.