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06 February 2015

CIMB Group Announces T18 and Key Organisation Changes

T18 is CIMB Group’s Mid Term Strategy Statement

Kuala Lumpur: CIMB Group today outlined its new T18 plans and key organisation changes. This set of initiatives is referred to as T18 (short for Target 2018) initiatives. T18 is the product of a strategic review exercise that began in January 2014. The project continued on a separate stream from the RHB-MBSB merger, and is now moving into the implementation stage. 

“We reviewed our starting position, current position, stakeholder expectations and the operating environment. I am happy to share some important T18 outputs with our stakeholders today and explain some of the consequential changes we are making,” said Tengku Dato’ Zafrul Tengku Abdul Aziz, Acting Group CEO, CIMB Group.

"We will recalibrate many things in 2015, then have 3 full years to accelerate based on those stronger foundations to reach our targets for 2018," added Tengku Zafrul. “T18 initiatives are focused on streamlining to get our cost structures right, focusing on priority areas that we have traditionally under-punched on, and strengthening the organisation culture,” he added.

"We have grown aggressively over the years and have a fantastic platform and brand. However we have weaknesses, and we can no longer depend on a high growth operating environment. The strategic review has been about identifying areas where we are but should not be, areas where we need to be better and areas where we are already strong. These form the basis of an action plan to get us to our targets for 2018 which will no doubt require some near term sacrifices,” Tengku Zafrul clarified.

Anchored on T18 initiatives, CIMB Group expects to achieve the following financial targets at the end of financial year 2018; ROE of more than 15%, CET1 of more than 11%, cost-to-income ratio of less than 50% and for consumer banking to contribute approximately 60% of its income.

"T18 is also about consolidation and being very measured about future growth. We have a very strong core engine and we will focus on realising the potential of our almost complete ASEAN platform. We are not looking for M&A opportunities except minor ones that help complete our ASEAN presence,” added Tengku Zafrul.

Key Announcements of T18 Initiatives

1.   A reorganisation exercise that will see the creation of a new Regional Commercial and SME Banking Division, an integrated Wholesale Banking Division combining IB, Treasury Markets and Corporate Banking to optimise internal synergies and sharpen corporate client interface, and a Regional Consumer Banking Division to drive consistency, further efficiencies and also to build out our ‘digital banking’ capability. In addition to this, Group Strategy (which includes the T18 Programme Management Office) will be moved directly into the Group CEO’s Office to ensure firm Group CEO oversight on implementation of T18 initiatives.

Key staff announcements as follows. All announcements effective 1 March, 2015, unless otherwise specified.

a) The current Corporate Banking, Treasury & Markets Division and Investment Banking Division will be combined to form an integrated Wholesale Banking Division. Tengku Dato’ Zafrul Aziz will assume the post of CEO of Wholesale Banking.

b) Dato’ Lee Kok Kwan, currently CEO of Corporate Banking, Treasury and Markets will be appointed Adviser to Group CEO for Wholesale Banking. Dato’ Lee will also be appointed to the board of CIMB Group Holdings Berhad, upon obtaining regulatory approval. 

c) Renzo Viegas will be appointed CEO of the Regional Consumer Banking Division. Dato’ Sulaiman Mohd Tahir will be appointed CEO of CIMB Bank Berhad, upon obtaining regulatory approval. 

d) Yong Jiunn Run, currently the Head of Commercial Banking, CIMB Bank Singapore will be appointed Acting CEO of the newly formed Group Commercial and SME Banking Division.

e) Kenny Kim, currently Group CFO and CEO of Group Strategy and Strategic Investments will be appointed Adviser to the Group CEO for Finance, Asset Management and Investments.

f) Shahnaz Jamal, currently Deputy Group CFO will be appointed Group CFO, CIMB Group.

g) Arwin Rasyid has announced his intention to retire and will step down as President Direktor of CIMB Niaga at the next CIMB Niaga AGM tentatively set to be held in April, 2015. He will remain President Direktor of CIMB Niaga until then.

h) Dato’ Robert Cheim, Adviser to the Investment Bank, will retire from the CIMB Group board and his advisory positions; but will remain Chairman of CIMB Thai and also sit on the boards of other CIMB Group companies.

i) Dato’ Dr. Gan Wee Beng, Adviser to Risk Management, will retire effective 1 July 2015.

Aside from the new CEO of CIMB Niaga, forthcoming major new appointments are CEO, Group Asset Management & Investments and Group Chief Compliance Officer.

Please see Appendix 1 for Organisation Chart.

Commenting on the reorganisation, Tengku Zafrul said, “We’ve obviously made a lot of big decisions here. For example, our markets (equity and debt) infrastructure was clearly a replicative cost function, so, we delayered it. And given our focus on commercial and SME, it made perfect sense to give it its own division. As for senior leadership, we are putting together a good blend of experience and fresh perspectives.” 

2. To reassess our Asia Pacific IB presence, and to reduce investment banking and equities costs across the franchise.

Commenting on this, Tengku Zafrul said, “We have taken a long hard look at our Asia Pacific IB presence and we’ll have torecalibrate this. Given the realities of capital markets, we will look at reducing the overall IB operating cost by about 30% in 2015.”

3. Implementation of a range of initiatives designed to drive cost-to-income ratio down to below 50% in 2018. Various efforts are being implemented including process changes, automation and improvements in procurement processes. 

On this, Tengku Zafrul said, “I have my eye trained on driving our cost-to-income ratio down. We are targeting less than 50% by 2018 and this will require discipline and total commitment. We will be right sizing, toughening our regional operating model and streamlining processes. And this is just Phase 1 of a long list of cost management measures the firm is undertaking.”

4. To accelerate and intensify the build out of three key businesses, namely Commercial and SME Banking, Transaction Banking and Digital Banking.

On this area, Tengku Zafrul said, “These are areas that we have huge opportunities to grow into and can provide material uplift in the medium term. Efforts are already underway and we are targeting a PBT uplift of RM1 billion (equating to a 1-1.5% uplift in our ROE) from these areas alone over the next 3 years.”

5. To execute a Group wide exercise focusing on culture of the organisation.

On this, Tengku Zafrul commented, “Culture is always an important piece. And this becomes even more important given the diversity of individuals and geographies that make up CIMB today. We expect a culture exercise to galvanise our people and strengthen teamwork across businesses and borders.”

In closing, Tengku Zafrul remarked, “2015 is the year we recalibrate and set the pace for our journey towards T18. I am excited and thankful to the Board for their trust in my leadership as we move these plans into the execution phase.”