Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (Aug 28): CIMB Group Holdings Bhd, which net profit shrunk substantially due to hefty provision in the first six months, expects to perform better in the second half of its financial year ending Dec 31, 2015 (2HFY15), while maintaining a challenging outlook.

CIMB (fundamental: 1.05; valuation: 2.25) group chief executive Tengku Datuk Zafrul Tengku Abdul Aziz said the group's brighter outlook for 2HFY15 is supported by expectations of lower provisions for the period.

"We expect the second half to be better in terms of our performance, because we think our provisions levels have peaked in the first half. Having said that, we remain cautious on the economic outlook for the second half of the year,” said Tengku Zafrul at today’s media briefing on the group's results for 1HFY15.

Tengku Zafrul added that CIMB is maintaining its return on equity (ROE) target of 11% and loan growth target of 10% for the group as a whole in 2015.

“As a group, we don't revise our targets midway. So we are not planning to revise the ROE and loan growth targets, but the ROE target is going to be very challenging. We think it is going to be a challenging task to meet the ROE target we set earlier, but we will still try to achieve that,” he added.

Its 2QFY15 net profit fell 33% to RM639.75 million from RM949.94 million in the previous corresponding quarter, while revenue declined 12% to RM3.83 billion from RM3.41 billion.

The group proposed a dividend of three sen a share for the quarter in review, despite the earnings contraction.

In notes accompanying its results, CIMB said bad loan allowance jumped to RM528.95 million during the quarter under review from RM147.18 million. The group also set aside RM9.38 million for commitments and contingencies in 2QFY15.

The banking group’s operating income, however, grew 4.2% to RM3.834 billion in 2QFY15 supported by 6% expansion in non-interest income and a 3.3% increase in net interest income.

The banking group’s net profit declined 40% to RM1.22 billion for 1HFY15 from RM2.02 billion a year earlier, although revenue grew 8% to RM7.51 billion from RM6.95 billion.

CIMB’s operating income increased 8.2% in the six months ended June 30 year-on-year (y-o-y) to RM7.514 billion underpinned by a 17.3% expansion in non-interest income and a 4.4% growth in net interest income.

For 1HFY15, the group posted ROE of 8.7% excluding costs related to the restructuring of its investment banking unit and the recently completed mutual separation scheme (MSS). Meanwhile, loans grew 12.2% y-o-y, with deposits increasing 6.2% excluding foreign exchange fluctuations.

On the group's regional expansion plans, Tengku Zafrul said that the group has a long-term view on its expansion strategy, and pointed out that the group has received approval-in-principle for its expansion into Vietnam.

"For Vietnam, we have received the approval-in-principle a month ago, and we hope to start operations within the next one year," he said.

Vietnam will be the ninth ASEAN country in which CIMB has a presence in, leaving the Philippines as the only country in the region the group has no foothold.

"For Philippines, we are going to continuously look at opportunities in the country. If we do find any opportunities to start there, be it organic or inorganic, we will do so. But for the time being, we will be focusing on our T18 plan," said Tengku Zafrul.

He added that the first phase of the group's T18 initiative has been completed, following the recent internal reorganisation and the MSS.

On the resignation of former CIMB Bank Bhd chief executive officer (CEO) Datuk Sulaiman Mohd Tahir and CIMB Islamic Bhd CEO Badlisyah Abdul Ghani, Tengku Zafrul said the group is still in the process of finding replacements for the two posts.

CIMB share price was hard hit by the bearish market sentiment, falling from RM6.30 in April to the recent low of RM4.62 early this week. The stock closed at RM5 today with market capitalisation of RM42.4 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

 

      Print
      Text Size
      Share