KUALA LUMPUR (May 31): CIMB Group Holdings Bhd (KL:CIMB), Malaysia’s second-largest banking group by assets, said on Friday its net profit rose 18% in the first quarter from a year earlier as both interest and non-interest income grew faster than costs and provisions.

Net profit for the three months ended March 31, 2024 was RM1.94 billion compared with RM1.64 billion over the same period a year earlier, CIMB said in an exchange filing. Net interest income grew 7.7% year-on-year to RM3.79 billion while non-interest income surged 24.5% to RM1.84 billion.

“The group maintains its cautious outlook for the year given the global economic headwinds with escalating geopolitical tensions, likelihood of prolonged elevated interest rates and continued competitive deposit and loan environment in Malaysia and regionally,” CIMB said.

No dividend was declared for the quarter.

“We expect our key operating markets to be resilient and well-positioned to capture economic growth, especially from the positive impact of increased tourism economy,” Chief Executive Officer Datuk Abdul Rahman Ahmad said in a separate statement.

Overall, CIMB is “optimistic of being on track to deliver on its FY24 targets on the back of positive performance from Malaysia and Singapore,” he said. For the year, CIMB is targeting 11%-11.5% in return on equity and achieved 11.4% in 1QFY2024.

In 1QFY2024, provisions for bad loans and other credit losses rose 13% to RM503.26 million while operating expenses rose nearly 9% to RM2.55 billion. Cost-to-income ratio was 45.3% in 1QFY2024, still within its target to keep the measure under 46.9% for the year.

The net interest margin — a measure of profitability from interests charged on loans after deducting returns paid to depositors — narrowed eight basis points, or 0.08 percentage-point, to 2.18% on lower cost of deposits in Malaysia and improved Indonesia loan yield.

CIMB said it will continue to focus on strengthening its deposit franchise, net interest margin management and driving net non-interest income expansion as well as ensuring digital and operational resilience.

Current-account-savings-account growth stood at 16.8% while gross loans and financing grew 7%. CIMB is targeting 5%-7% loan growth for the whole year.

In terms of asset quality, gross impaired loans — debts deemed unrecoverable as a percentage of total loans — ended March at 2.6%, while loan loss coverage was at 101%.

CIMB’s common equity tier 1 capital — a measure of a bank’s capital strength based on the highest quality of regulatory capital — improved 70 basis points to 15%, above its own target of at least 13.5%.

Shares of CIMB ended unchanged at RM6.84, valuing the banking group at RM73 billion ahead of the results announcement.