KUALA LUMPUR (Feb 29): CIMB Group Holdings Bhd said net interest margin (NIM) growth is possible in its current financial year ending Dec 31, 2024 (FY2024), with the figure to be "stable-to-expanding" by up to five basis points, as pressure on its margin subsides.
This is after the banking group recorded a steep NIM decline of 29 basis points (bps) to 2.22% in FY2023, primarily due to higher cost of deposits as a result of intense deposit competition.
Due to the decline in NIM, CIMB's net interest income (NII) dipped 3.5% to RM14.63 billion in FY2023. However, it was offset by non-interest income (NOII), which jumped 36.5% to RM6.39 billion from investment and market-related income.
NEWS: NIM compression may be over, says CIMB
"For 2023, on a year-on-year (y-o-y) basis, we have recorded 29bps NIM compression. And that's mainly driven by two markets — Malaysia and Indonesia. In Singapore, we actually expanded our margins on a y-o-y basis," CIMB group chief financial officer Khairul Rifaie told a media conference on Thursday, following the release of the group's full-year financial results.
"We did take some actions in moderating that deposit pricing pressure towards the second half of 2023, and for this year, at the group level, we are expecting NIM to be stable-to-expand by about five basis points, and that is mainly driven by Malaysia," he said.
The group is also intensifying its efforts to grow current-account-savings-account or Casa ratio, which expanded by 11.5% y-o-y, leading to a Casa ratio of 41.2% as at end-December 2023.
Malaysian banks were under NIM compression pressure that weighed on its NII, especially during the first half of last year, mainly due to the rising cost of funds from the full impact of upward deposit repricing, keener deposit competition and the continued normalisation of Casa balances.
Malaysia's largest bank by market capitalisation, Malayan Banking Bhd, saw NIM drop 27bps to 2.12% in FY2023, while the second largest, Public Bank Bhd, reported a decline of 19bps to 2.2%.
But slower loan growth expected
NEWS: CIMB sees slower loans growth in 2024
CIMB group chief executive officer Datuk Abdul Rahman Ahmad said the group is projecting a lower growth in its overall loan portfolio of between 5% and 7% for FY2024, compared with the strong 8.3% y-o-y growth it achieved in FY2023 on stronger demand across targeted key markets and segments.
"I think a constraint for all banks and not just for us is really about the deposit side, whether we have the ability to actually grow deposits more in order to manage NIM compression, which is happening at an industry level.
"So if your loan growth is too high or very high, then you are really under pressure to raise deposits and that will continue to put pressure on your cost of deposits. So we are putting, what we believe, an achievable loan growth target so we can raise our deposits at a level that wouldn't put pressure on our NIM," Abdul Rahman said.
Overall, Abdul Rahman said the group is cautiously optimistic of continued positive financial performance in 2024, with Asean economies remaining resilient. "Nevertheless, we remain extremely vigilant of global economic uncertainties," he added.
Earlier on Thursday, CIMB reported that its net profit rose nearly 30% y-o-y to RM1.72 billion for the fourth quarter of FY2023 from RM1.32 billion a year earlier, thanks to higher operating income and lower provisions. NII was at RM3.7 billion while NOII was RM1.67 billion.
Full FY2023 net profit climbed 28.3% to RM6.98 billion from RM5.44 billion a year ago, lifted by the strong NOII jump.
The group recommended a second interim dividend of 18.5 sen per share and a special dividend of seven sen per share. This brings the total dividend declared for FY2023 to a record high of 43 sen per share.
Total dividend payout for the year came out to RM4.58 billion, almost double the previous year's RM2.75 billion.
At Thursday’s market close, CIMB shares rose three sen or 0.47% to RM6.46. The counter has risen 62 sen or 10.62% since the start of 2024 and gained 88 sen or 15.77% over the past year.