KUALA LUMPUR (Aug 29): CIMB Group Holdings Bhd (KL:CIMB) is holding firm to its loan growth target of 5-7% on a constant currency basis, banking on a rebound in wholesale banking and disciplined cost management to sustain momentum through the second half of the year.
Group CEO Novan Amirudin said the bank’s performance has remained resilient so far, despite what he called “the perfect storm of macroeconomic headwinds and increased volatility".
For the first half of its financial year 2025, CIMB recorded loan growth of 3.6% year-on-year (y-o-y) on a constant currency basis. While the banking group's net profit for the period eased 0.9% y-o-y to RM3.86 billion from RM3.90 billion, net earnings actually rose 3.3% after adjusting for currency effects.
“Consumer and commercial banking are expanding in line with GDP,” Novan said at a media briefing. “Wholesale banking declined, particularly in Malaysia, but that’s largely a timing issue. We’re seeing pipelines built and expect a recovery in the second half,” Novan said.
He said wholesale banking — which deals with large corporations and institutional clients — tends to be lumpy, as it doesn't happen on a predictable schedule, but in large, infrequent batches. But, based on ongoing client discussions, the group is confident of a pickup. “These deals are chunky. From the conversations we’re having, we’re confident they’ll come through."
Meanwhile, despite some clients opting for capital markets over bank financing, CIMB has maintained its leadership in bond underwriting. “Local currency bond volumes in Malaysia rose 16% y-o-y, and we’ve retained our position as one of the leading underwriters,” Novan said, noting that business sentiment was improving, supported by greater clarity in the trade environment.
Margin resilience anchored by deposit strategy and cautious growth
CIMB’s net interest margin (NIM) — a key indicator of its profitability as it measures the difference between the interest income a bank earns from loans and the interest it pays out on deposits — held firm at 2.15% in the second quarter, slipping just one basis point from end-2024. This is despite aggressive rate cuts in Indonesia, Thailand and Singapore.
Novan attributed the stability to the bank’s disciplined deposit-led strategy and proactive cost of funds management.
He also noted that CIMB’s cautious approach to growth over the past two years had also contributed to its margin resilience. While some peers expanded aggressively in markets like Indonesia, CIMB opted for restraint. “We didn’t see a benign asset quality environment back then, so we chose to be more careful,” he said.
That prudence extended to funding costs, which CIMB managed to reduce by 18 basis points y-o-y and 10 basis points quarter-on-quarter, while current-account-savings-account (Casa) balances rose 10%, outpacing loan growth and lifting the bank’s Casa ratio to 44%.
Novan credited the group’s OCTO consumer app as the key driver to the growth in Casa balances, a key factor in lowering funding costs.
“There’s no magic pill. Casa is a by-product of having a good system,” he said. “When banking is joyful, customers naturally channel their collections and payments through OCTO, and Casa balances grow organically.”
Tech strategy with AI, app enhancements and SME solutions
Technology remains central to CIMB’s strategy, with investments maintained at 8-9% of income. “Our tech cost-to-income ratio is at 7.9%, within our annual guidance,” Novan said, noting that the group is advancing its “Forward 30” strategy, focused on digital capabilities.
A key initiative is the launch of the Simpler, Better, Faster (SBF) Lab, aimed at streamlining processes across the organisation. “We already have 24 projects in the pipeline,” Novan said.
Among the more innovative projects is CIMB FlexiPay, a new revenue-based loan product for SMEs in Singapore. Traditionally, small businesses were required to provide collateral to secure financing. CIMB’s new approach uses algorithmic models to assess cash flow and revenue, enabling more tailored lending decisions without the need for physical collateral.
“We launched FlexiPay very recently in Singapore, and we’re excited to see how it performs,” Novan said. “It’s the first of its kind for us — a new innovation born from direct engagement with our SME customers. Their biggest challenge is working capital, and this product is designed to meet that need.”
CIMB is also rolling out role-specific AI assistants, including tools for relationship managers in Indonesia that deliver product, customer and market insights. “We’re incorporating AI into our call centres to improve efficiency,” he added.
Digital wealth is another area being strengthened through OCTO. “Customers can now purchase investment products via the app. It’s early days, but we’re seeing increased transactions and expect this to drive non-interest income,” Novan said.
CIMB is preparing to launch OCTO Biz, its new digital banking app for businesses, in Malaysia and Indonesia next month. According to Novan, the app is designed to serve companies in much the same way that OCTO supports retail customers.
While CIMB already offers a business banking channel, the new version has been significantly enhanced to deliver a user experience as seamless and enjoyable as the OCTO app, he added.
CIMB’s shares closed two sen or 0.3% lower at RM7.43 on Friday, valuing the banking group at RM79.95 billion.