This article first appeared in The Edge Financial Daily on July 30, 2018

PETALING JAYA: CIMB Group Holdings Bhd said it is not planning on listing its 52%-owned electronic payment systems subsidiary Touch ‘n Go Sdn Bhd on the Main Market of Bursa Malaysia anytime soon.

“We want to see Touch ‘n Go produce more results first. I think one year is a bit too soon for the company to create value and have the necessary track record that will fetch the right IPO (initial public offering) valuation,” CIMB group chief executive officer Tengku Datuk Seri Zafrul Aziz told reporters after delivering a keynote address at The Economic and Leadership Forum 2018 on Saturday. The event was organised by the London School of Economics Students’ Union Malaysia Club.

“At the end of the day, we (CIMB) want to make sure that it (Touch ‘n Go) creates value before proceeding with any listing plan,” he said.

“If we believe that we may need the capital to fuel faster growth, then we will look at the listing possibility,” Zafrul added.

Talks of Touch ‘n Go planning an IPO emerged as early as May 2014. The Edge Malaysia weekly in January 2017 raised the possibility of CIMB unlocking the Touch ‘n Go asset as part of its plans to divest its non-core assets.

In July 2017, Touch ‘n Go teamed up with Ant Financial — an affiliate of Alibaba Group — and inked a joint-venture agreement to roll out a mobile wallet ecosystem for Malaysians, which is expected to be launched in October.

Apart from CIMB, the other two shareholders of Touch ‘n Go are UEM Group Bhd (20%) and MTD Equity Sdn Bhd (27.78%).

CIMB’s Annual Report 2017 revealed that Touch ‘n Go generated RM32.53 million in pre-tax profit on revenue of RM122.03 million for the financial year ended Dec 31, 2017.

As at end-2017, Touch ‘n Go had more than 20 million e-payment cards circulating in the country.

Zafrul also said CIMB is keeping its loan growth forecast of between 6% and 7% this year, which is expected to be in line with the overall banking system’s loan growth.

“For Malaysia specifically, our loan growth target remains on track. Based on what we are observing now and if the current economic growth is at where it is today, CIMB should be able to meet the target,” he added.

On the reintroduction of the sales and services tax (SST) in September, Zafrul believes the new tax regime will not have a significant impact on CIMB’s loan growth, “as consumption continues to remain strong”.

The SST will replace the goods and services tax (GST) and is slated to rake in a lower contribution of RM21 billion to the government’s coffers in 2018, compared to the annual GST collection of RM44 billion.

Meanwhile, Zafrul said CIMB will launch a new five-year plan from 2019 to 2023 towards the year end, which will replace the current Target 2018 (T-18) initiative, and it will be anchored by three key pillars that include sustainability.

Zafrul said the group remains on track to achieve its T-18 goals to streamline CIMB’s cost structure and strengthen the organisation culture.

“I am optimistic that CIMB will be able to achieve the T-18 target this year,” he said, adding that the group is seeing good improvement in Indonesia and Thailand, while Malaysia and Singapore continue to be strong.

In February 2015, CIMB launched a four-year T-18 initiative, which is a comprehensive strategy for Malaysia’s second-largest bank to achieve certain key performance indicators such as a return on equity of between 10.5% and 11%, and a reduction in the cost-to-income ratio to below 50%.

In line with the bank’s digitisation agenda, Zafrul said CIMB sees sufficient room to increase its staff strength, which currently numbers 35,000.

“We are going into big data and analytics, and we are looking to invest in the right talent to spearhead this agenda,” he added.

Zafrul also said cost-cutting measures do not necessarily mean trimming down its workforce.

“Cost-cutting measures are really about improving productivity, which is defined as cost over income. It is not the people cost that I am concerned about, it is really the wastage cost. What we want to see is income growing faster than cost,” he added.

CIMB shares closed up one sen or 0.17% at RM5.89 last Friday, with a market capitalisation of RM55.17 billion.