This article first appeared in The Edge Financial Daily on November 29, 2017

KUALA LUMPUR: CIMB Group Holdings Bhd, the country’s second-largest lender by assets, reported a 10.7% increase in net profit for its third quarter ended Sept 30, 2017 (3QFY17) to RM1.13 billion from RM1.02 billion a year ago, driven by growth in both its consumer and wholesale banking performance.

Earnings per share rose to 12.5 sen in 3QFY17 from 11.74 sen in 3QFY16.

CIMB posted its highest quarterly operating income of RM4.42 billion in 3QFY17, up 7.3% from RM4.12 billion in 3QFY16. In a statement yesterday, CIMB group chief executive officer Tengku Datuk Seri Zafrul Aziz said the improved performance was underpinned by positive net interest margins, gradually declining provisions and healthier capital market activity. “In particular, the group’s consumer banking franchise in Malaysia and Thailand, as well as investment and corporate banking activities contributed to the respectable results for the quarter under review,” he added.

The strong third-quarter performance pushed net profit for the cumulative nine months (9MFY17) up by 26% to RM3.41 billion from RM2.71 billion a year ago, with annualised net return on average equity of 9.8%. Operating income rose 11.6% to RM13.11 billion in 9MFY17 from RM11.75 billion in 9MFY16, largely driven by a 11.2% year-on-year (y-o-y) growth in non-interest income in line with better capital market activity and improved fee income.

CIMB said non-Malaysia profit before tax (PBT) contribution to the group rose to 33% in 9MFY17 compared with 25% in 9MFY16. “Indonesia’s PBT expanded by 67.1% y-o-y to RM966 million in tandem with the improving financial performance at CIMB Niaga. Thailand’s PBT contribution of RM194 million was 33.8% higher y-o-y arising from lower provisions and operating expenses. Total PBT contribution from Singapore was 45.2% higher at RM289 million on the back of improved revenues,” it added.

The group’s total gross loans (excluding the bad bank) grew by 7% y-o-y as at Sept 30, 2017, while total deposits grew 4.5% y-o-y. Loan-to-deposit ratio stood at 92% compared with 89.8% in 9MFY16. Gross impairment ratio stood at 3.5% as at end-September 2017, with an allowance coverage of 72.4%. CIMB’s cost-to-income ratio improved to 52.1% compared with 54.6% in 9MFY16, in line with stronger revenues and sustained cost management. The group’s net interest margin improved to 2.67% for 9MFY17 from 2.61% in 9MFY16 due to better liability management across all countries.

On prospects, Tengku Zafrul said the group remains on track to meet its key financial targets for 2017. “While the trajectory of regional economies is generally positive and capital market activity is picking up gradually, we maintain our cautiously optimistic outlook and are mindful of keeping tight controls over asset quality and cost across all businesses. We are also pleased to have received our full banking licence to operate in the Philippines, which marks the completion of our Asean footprint,” he added.