KUALA LUMPUR (Aug 28): CIMB Group Holdings Bhd is expecting a margin compression of 10 to 15 basis points (bps) on net interest margin (NIM) for the financial year ending Dec 30, 2020 (FY20), in contrast to its earlier guidance of four bps.
CIMB group chief financial officer Khairul Rifaie told a media briefing that the more severe NIM compression is the result of the RM281 million modification loss and the three overnight policy rate (OPR) cuts by Bank Negara Malaysia this year.
The banking group’s NIM was at 2.46% last year and a 15 bps compression would mean that its NIM would shrink to 2.31% end-FY20, said Khairul at a virtual press conference on the group’s first half of 2020 financial results.
Nonetheless, CIMB Group’s NIM already contracted to 2.29% in the first six months ended June 30, 2020 (1HFY20) owing to the impact of interest rate cuts across the region as well as the one-off modification loss booked in 2Q20 arising from fixed rate loans.
“Excluding the modification loss, the group’s 1H20 NIM was only seven bps lower at 2.39%,” said CIMB.
CIMB’s net profit slid 82% to RM277.08 million in the second quarter ended June 30, 2020 (2QFY20) from RM1.51 billion a year ago, as it was adversely impacted by the challenging economic environment as well as a modification loss arising from the loan moratorium given to borrowers.
The group recognized an RM281 million modification loss.
Quarterly revenue fell 14% year-on-year to RM3.87 billion from RM4.47 billion previously.
On a quarter-on-quarter basis, net profit declined 45% from RM507.93 million in 1QFY20 while revenue dropped 7% from RM4.14 billion.
Net interest income stood at RM2.48 billion in 2QFY20 versus RM2.38 billion a year ago.
For the cumulative six months of FY20, net profit slid 71% to RM785 million versus RM2.7 billion a year ago, while revenue fell 7% to RM8.01 billion compared with RM8.63 billion previously.
Shares of CIMB dropped seven sen or 2.08% to RM3.30 at the closing bell today, valuing the banking group at RM32.75 billion. The stock has fallen 36% from RM5.15 year to date.
Edited by Kathy Fong