KUALA LUMPUR: CIMB Group Holdings Bhd’s net profit for the third quarter ended September of financial year 2014 (3QFY14) fell 16% to RM890.27 million or 10.72 sen per share, from RM1.06 billion or 13.91 sen per share a year ago, due to higher loan impairments from its 97.94%-owned subsidiary PT Bank CIMB Niaga Tbk (CIMB Niaga).

Revenue, or operating income, rose 1.3% to RM3.53 billion, from RM3.49 billion in 3QFY13.

CIMB said its net interest income, which rose 4.8%, was partially offset by a 6.4% decline in non-interest income due to softer treasury and markets as well as lower fee-based income from CIMB Niaga.

For the nine months ended September (9MFY14), CIMB’s net profit declined 17% to RM2.91 billion or 35.22 sen per share, from RM3.5 billion or 46.51 sen per share a year ago. It attributed this to challenging operating conditions in Indonesia, the weaker rupiah and weaker capital markets.

CIMB Niaga’s profit before tax (PBT) declined 36.4% year-on-year (y-o-y) to RM875 million.

Excluding the exceptional gains from the sale of CIMB Aviva and restructuring charges in 9MFY13, the group’s net profit for 9MFY14 fell by a lower margin of 7.4% y-o-y, said CIMB. For 9MFY14, operating income stood 3.7% lower at RM10.47 billion, compared with RM10.87 billion earlier.

CIMB’s consumer banking segment, which reported a 2% decline in y-o-y PBT to RM1.72 billion, still accounted for 44.2% of group PBT, more than 42% in 9MFY13. Of this, Indonesian consumer banking operations saw a 48.8% y-o-y drop in PBT to RM235 million from RM459 million.

Meanwhile, the wholesale banking segment, which reported a 12.8% y-o-y drop in PBT to RM1.77 billion — due to slower equity and wholesale markets — accounted for 44.8% of group PBT.

“CIMB Malaysia should maintain steady growth, while CIMB Singapore is expected to maintain a positive momentum. Thailand is showing encouraging signs of economic recovery and improving consumer confidence.

“The gradually improving capital markets augur well for the group’s treasury and markets. However, CIMB Niaga is expected to continue to be challenged by asset quality and tight liquidity in the Indonesian banking system in the near term,” said acting group chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz in a statement.

This article first appeared in The Edge Financial Daily, on November 19, 2014.