CIMB Group announces RM1,123 million Profit Before Tax for 1QFY16

1) Summary

CIMB Group Holdings Berhad (“CIMB Group” or the “Group”) today reported a Profit Before Tax (“PBT”) of RM1,123 million for the first quarter of 2016 (“1Q16”). On a year-on-year (Y-o-Y) basis, the Net Profit of RM814 million improved 4.1% compared to the Business As Usual (“BAU”) 1Q15 Net Profit of RM782 million. The 1Q16 net earnings per share (“EPS”) stood at 9.5 sen, while the annualised 1Q16 net return on average equity (“ROE”) was 7.9%.

“We posted a respectable performance for 1Q16 despite the difficult operating conditions across the region, with Y-o-Y improvements in our Consumer, Wholesale Banking and Group Asset Management and Investments divisions. The 1.2% Y-o-Y growth in operating income was achieved in spite of the weak capital markets. Our strict cost control initiatives and declining provision levels enabled the Group to achieve a 4.1% net profit growth," said Tengku Dato’ Sri Zafrul Aziz, Group Chief Executive, CIMB Group.

2) CIMB Group 1Q16 Y-o-Y Results 

For comparative purposes, the corresponding 1Q15 numbers are based on BAU basis. CIMB Group’s 1Q16 operating income grew 1.2% Y-o-Y to RM3,725 million underpinned by a 8.5% improvement in non-interest income but partially offset by a 14.5% decline in net interest income, which felt the effects of a softer capital market environment in 1Q16. Operating expenses were flat Y-o-Y but was 4.0% lower after excluding foreign currency translation effects, reflecting the Group’s stricter cost management initiatives. This brought about the 2.8% improvement in the Group’s Pre-Provisioning Operating Profit (“PPOP”). The Group’s PBT was 9.5% higher at RM1,123 million, in tandem with a 13.2% Y-o-Y decline in loan provisions.

The Group’s regional Consumer Bank PBT increased by 35.5% Y-o-Y in 1Q16 to RM557 million, making up 50% of Group PBT. The better performance was fuelled by consumer loans growth across the region as well as lower consumer provisions. The regional Commercial Banking PBT was 21.5% lower Y-o-Y at RM146 million largely attributed to higher provisions in Indonesia, Thailand and Singapore. The Group’s Regional Wholesale Banking PBT improved by 24.8% Y-o-Y to RM408 million from better performances at Corporate Banking and Treasury & Markets, while Investment Banking was softer on the back of slower markets. Group Asset Management and Investments (“GAMI”)’s PBT expanded 43.6% Y-o-Y due to higher contributions from investments, while Group Funding PBT was 242.6% lower Y-o-Y from higher costs of funding and lower investment returns.

Notes: * Excluding : IB restructuring costs (RM202 mil)

Non-Malaysia PBT contribution to the Group increased to 26%  in 1Q16 compared to 20% in 1Q15, largely attributed to the 158.3% Y-o-Y improvement in Indonesia’s PBT to RM124 million in line with lower provisions at CIMB Niaga. Thailand's PBT contribution was 51.7% higher Y-o-Y at RM88 million given lower provisions in the first three months of 2016. Total PBT contribution from Singapore was 42.1% lower at RM62 million from increased commercial banking provisions.

The Group’s total gross loans (excluding the bad bank) expanded 7.5% Y-o-Y or 5.6% excluding FX fluctuations. Total deposits grew 6.8% Y-o-Y or 5.0% excluding FX fluctuations. The Group’s loan to deposit (“LDR”) ratio stood at 90.6% compared to 90.3% in 1Q15.

Notes:
* Gross loans excludes bad bank
^ In local currency
** Including Labuan, London, Cambodia, Hong Kong & Shanghai
^^ Excluding FX fluctuations

The Group’s gross impairment ratio reduced to 3.0% as at March 2016 from 3.2% in March 2015, with a higher allowance coverage of 84.8% as at March 2016. The Group’s cost to income ratio improved to 57.4% compared with 58.0% in 1Q15, with the Group’s cost management initiatives continuing to show results. The Group’s Net Interest Margins (“NIM”) were lower at 2.62% driven mainly by the higher cost of deposits in Malaysia.