KUALA LUMPUR (July 19): CIMB Group Holdings Bhd's 94.11%-owned subsidiary CIMB Thai Bank PCL's net profit for the second quarter ended June 30, 2018 (2QFY18) was 46.38% lower to 191.23 million baht versus 356.64 million baht last year due to higher operating expenses coupled with an increase in provisions.

CIMB Thai reported higher other operating expenses of 16.09% to 1.94 billion baht, from 1.67 billion baht.

Its quarterly operating income, however, was 4.91% higher at 3.41 billion baht, compared with 3.25 billion baht in 2QFY17, due to gains on financial liabilities designated at fair value against a loss last year.

For its cumulative six months ended June 30, 2018 (1HFY18), its net profit was down 24.64% to 360.12 million baht, from RM477.84 million baht.

Operating income, on the other hand, increased 6.46% to 6.8 billion baht, against 6.38 billion baht in 1HFY17.

In a statement today, CIMB Thai's president and chief executive officer Kittiphun Anutarasoti attributed the higher operating income in 1HFY18 to a 5.2% growth in net interest income, a 10% growth in net fee and service income and a 12.6% growth in other income.

Meanwhile, operating expenses in 1HFY18 increased by 13.31% to 3.87 billion baht from 3.42 billion baht, mainly from higher personnel cost and loss on sale of properties for sale, which, then, resulted in a higher cost-to-income ratio of 57% in 1HFY18 compared to 53.6% last year.

Net interest margin (NIM) over earning assets stood at 3.87%, compared to 3.81% in 1HFY17 as a result of more efficient management of funding costs, said Kittiphun.

The total gross loans, including loans guaranteed by other banks and loans to financial institutions, stood at 215.2 billion baht, marking a 1% increase from Dec 31, 2017, he said, adding that the modified loan-to-deposit ratio was lower at 95.9% compared to 96.8% as at Dec 31, 2017.

The gross non-performing loans (NPL) stood at 12.6 billion baht, with an equivalent gross NPL ratio of 5.8% from 4.8% as at Dec 31, 2017. "The increase was attributed to commercial banking loans in 6M2018 and the sale of NPLs in 2017," he added.

Kittiphun noted that the loan loss coverage ratio declined to 90.1%, from 93.2% at the end-December 2017.

The total provisions stood at 11.3 billion baht, translating to a 4 billion baht excess over the Bank of Thailand's reserve requirements, he added.

With the total consolidated capital funds at 43.9 billion baht, Kittiphun said the BIS ratio stood at 17%, 12% of which comprised Tier-1-capital.

At noon break, shares in CIMB Group were two sen or 0.34% lower at RM5.83 for a market capitalisation of RM54.32 billion.