KUALA LUMPUR (Aug 30): CIMB Group Holdings Bhd foresees that pressure on its net interest margin (NIM) will dissipate in the second half of 2023 (2H2023).
“NIM pressure is expected to subside as the group continues to focus on strengthening CASA (current account savings account) and deposit financing,” CIMB group chief executive officer Datuk Abdul Rahman Ahmad told a media conference on Wednesday, in conjunction with the release of the group's second quarter results.
The bank will continue to maintain a cautious stance, given global headwinds, elevated interest rate and heightened deposit competition, he said.
In the first half ended June 30, 2023 (1HFY2023), CIMB's net interest income (NII) contracted marginally to RM7.17 billion, from RM7.22 billion in 1HFY2022, due to NIM compression caused by the heightened cost of deposits, which was partially offset by a positive loan growth momentum.
The group plans to address the issue by continuing to execute the group’s Forward23+ strategic plan, especially in strengthening its CASA franchise and deposits, said Abdul Rahman.
“The challenge is the intense deposit competition, which I think all banks in Malaysia are facing at the moment, but we expect that to moderate in the remainder of the year.
“We, in fact, see this [mitigating the competitive deposit environment] as part of our Forward23+ [targets] and one of the key elements [to achieve that] is by accelerating and enhancing our CASA and deposit franchise,” he said.
No further OPR hike expected
CIMB expects Bank Negara Malaysia (BNM) to keep the OPR unchanged — currently at 3% — at its upcoming Monetary Policy Committee meeting scheduled for Sept 6 and 7.
“There is a short term positive impact to our net interest income (NII) and profitability [if OPR is raised], but that gets eroded very quickly once we price up our deposits — it's just a timing issue.
“Our expectation for Malaysia, we are expecting that the rates (OPR) will remain stable or zero hikes or cuts for the rest of the year,” said CIMB group chief financial officer Khairul Rifaie.
Weighing all the above and the group’s achievements in 1HFY2023, Abdul Rahman said CIMB is on track to delivering its targets for FY2023.
Among its targets are: an annualised average return on equity (ROE) of 10.2%-11%, a dividend payout ratio of 40%-60%, total loan growth of 5%-6%, cost to income ratio of up to 46.5%, a loan loss charge of 45-55 basis points, and a Common Equity Tier 1 (CET1) ratio of over 13.5%.
“Of course we have to work hard to do so (achieve FY2023 targets) but for the time being — and in terms of where we are today, I think we are still positive and committed to deliver the targets,” added Abdul Rahman.
For 1HFY2023, CIMB's net profit grew 26.23% to RM3.42 billion from RM2.7 billion, as revenue rose 7.38% to RM10.33 billion from RM9.62 billion. The group declared a first interim dividend of 17.50 sen per share, 35% more than the 13 sen it paid in the same period in FY2022.
CIMB shares closed unchanged at RM5.63 on Wednesday, giving the group a market capitalisation of RM60.05 billion.