KUALA LUMPUR (Aug 30): CIMB Group Holdings Bhd (KL:CIMB) says it is optimistic about the growth of its non-interest income amid the flow of funds into emerging Asian markets prompted by the imminent global interest rate cuts.
Currently, the non-interest income to total income ratio of the bank stands at 31.9%.
“We're seeing increased foreign flows into our capital markets," said CIMB's newly appointed chief executive officer Novan Amirudin on Friday. "And I'm proud to say that we have been at the forefront in terms of facilitating some of these flows into our country.”
The increased fund flows are also due to concerted efforts by the government, including targeted foreign direct investment (FDI) programmes and directives to government-linked investment companies to repatriate their overseas profits to the country, said Novan at a press conference following the release of CIMB's second-quarter results.
On investment banking activities, Novan said the bank remained focused on going after quality issuers while deal-making has been down throughout the region.
“We are still seeing a lot of activity on quality issuers and names, and I'm proud to say that CIMB is leading the charge on that. One IPO that we are running right now on a sole basis is the 99 Speedmart IPO,” he said.
When asked about prospects of blockbuster deals down the pipeline, Novan said there has been a lot of discussion as a result of the various programmes that the government has put in place, and the bank is there to play a role to facilitate the deals.
“We are not just for the sake of doing deals, but things that will reinvent the market,” he added.
On the benefit for its wholesale banking arm from government-led FDI programmes, CIMB said it will remain prudent and ensure that it provided the right loans "that would work for the bank and its clients".
He added: “It is all about ensuring that we have the right structure, the right loans that would work for both our clients and ourselves. So we will continue to remain very disciplined, making sure that loans are structured properly.
"As you have seen, there is a lot of FDI, there are a lot of programmes, there are a lot of funds coming in. If, let's say, we can come up with something that works for both sides, a win-win for the clients and us, then yes, that could be a potential area.
CIMB saw its gross loans grow 4.2% year-on-year, with the consumer and commercial arm growing more than 5%, but only mentioned that its wholesale bank grew on a lesser extent without divulging more details.
The bank shared that it has been careful on its wholesale banking arm, focusing on client profitability as opposed to gaining market share at any cost.
“Put all those factors together, I am very optimistic about what we are seeing,” said Novan.
When asked if non-interest income would contribute more to the bank’s total income in the future given that the new CEO is from a strong investment banking background, Novan did not address the question directly, but stressed that cost-optimisation remains important.
"If you look at the top exceptional banks globally, they do a few things very, very well. And one of the things is non-interest income because that requires less capital or does not use capital.
"The other thing that they do very well is cost-income ratio. They are very, very efficient. And the third thing that they do very well, in fact, this should be the first thing, is really their deposits and liquidity. It's a very deposit-led type of focus. CASA (current account and savings account) ratio is very high, LDR (loan-to-deposit ratio) is very optimised. So we work with the team to ensure that our strategy achieves what we need to achieve."