KUALA LUMPUR (Aug 28): CIMB Group Holdings Bhd has joined the top banks to skip declaring dividends in the current June quarter.
The other banks that did not declare dividend payments this June quarter compared with declaring dividends last June quarter were Malayan Banking Bhd, Public Bank Bhd and RHB Bank Bhd. Together with CIMB, they are the top four banks in the country.
Despite not declaring dividends in the second quarter ended June (2QFY20), CIMB assured that it remains committed to its dividend payout policy of 40% to 60% of its net profit to shareholders.
Its newly appointed group chief executive officer Datuk Abdul Rahman Ahmad believes that it is prudent for the bank to take a step back this 1H20 ended June, given the low visibility of the current economic environment.
“As such, we are not announcing any interim dividends for the 1H of the year. However, we will revisit the situation at year end, and make a decision at that point in time, and subject to regulatory clearance,” he added at a virtual press conference today on the group’s first half of 2020 financial results.
CIMB had declared a 14 sen dividend per share for 1H last year.
At present, CIMB’s stock at RM3.30 per share is trading at a dividend yield of 7.88%.
Looking into CIMB’s past dividend trend, the banking group’s gross dividend per share has been on an uptrend from FY2015 till FY2019.
Its gross dividend per share was at 14 sen in 2015 and rose to 20 sen in FY2016 and 25 sen for both FY2017 and FY2018. It then increased to 26 sen for FY2019.
Moving forward, Abdul Rahman expects the prospects for the banking industry to remain challenging, but was quick to add that it all depends on the shape and pace of the recovery.
“So, if the recovery remains muted, and if that (economic recovery) happens, then industry growth will follow suit,” Abdul Rahman pointed out.
On loan growth, he sees the full year to be around the 2% to 4% range for the entire group and for Malaysia, offsetting the anticipated negative loan growth in PT CIMB Niaga Tbk.
“With the economic activities slowing down, it is important for us to maintain our asset quality and strengthen our books. So, because of that, we are expecting loan growth to remain muted for the rest of the year,” Abdul Rahman said.
While he sees the low interest rate environment to continue for the rest of the year, he said CIMB expects the overnight policy rate (OPR) to be maintained although he noted the possibility of another rate cut.
Malaysia has had three OPR reduction rate cuts this year with its latest cut on July 7 of 25bps. The OPR is now at a record low of 1.75%
Abdul Rahman also noted that the bank is targeting an aggressive full-year cost reduction of RM500 million to mitigate the impact of the challenging economic environment.
For 1H20, he said the cost reduction achieved was 3.3%, and the RM500 million target equals 5% for the full year.
“The plan effectively is to optimise investment, expenditure and really look into discretionary expenditure that we can defer as well as non-essential spending,” said Abdul Rahman.
At 5pm, shares of CIMB closed seven sen or 2.08% lower at RM3.30 today, valuing the bank at RM32.75 billion. At RM3.30, the stock is trading at 0.6 times price to book.
Year to date, the counter is down 36% from RM5.15.