KUALA LUMPUR (Aug 30): CIMB Group Holdings Bhd is expecting a margin expansion of 10 to 20 basis points (bps) in net interest margins for the financial year ending Dec 31, 2021 (FY21), despite facing margin pressure in the second half of financial year 2021 (2HFY21).

Its group chief financial officer Khairul Rifaie told reporters in a virtual press briefing that the bank is looking at a margin expansion on a year-on-year basis for FY21, mainly driven by the absence of the negative impact coming from the rate cuts that happened in 2020, coupled with the group's liability optimisation in 1HFY21.

However, he warned that the bank will face some margin compression going into 2HFY21, as the effects of the optimisation taper off, adding pressure on the cost of deposits.

Meanwhile, Khairul also expects credit costs to trend higher with an 80 to 90 bps guidance when the year ends, compared with 74 bps in 1HFY21 amid the six-month loan moratorium given by banks to affected borrowers under the Pemulih programme.

"So we do expect that credit costs will increase in the second half of the year, and this is mainly driven by additional potential overlays that we're going to put on as we weather the restructuring and rescheduling (RNR) to the loan moratorium under the Pemulih programme, as well as the rest of the other regions.

"[Hence,] we do expect provisions to remain relatively elevated for the remainder of the year. And that is a direct impact coming from the moratorium, as we do have a cautious outlook, in terms of our asset quality for the remainder of the year," he added.

CIMB group chief executive officer Datuk Abdul Rahman Ahmad said the bank remains concerned and cautious in 2HFY21, due to potential downside risks of Covid-19 resurgence adding to the uncertainty surrounding the opening and recovery of regional economies.

"The prolonged lockdown will likely result in headwinds to operating income growth coupled with the impact of the payment assistance modification loss and elevated provision," he added.

"Accordingly, we have lowered our loan growth guidance for FY21 to between 2% and 3% due to the challenging environment," he concluded.

Earlier, CIMB had provided a loan growth guidance of 4% to 5% for FY21, after a 1% contraction in FY20.

For 1HFY21, CIMB saw its net profit jump more than four-fold to RM3.54 billion from RM785 million in the previous January to June period, lifted mainly by a significant net contribution from exceptional items, primarily the one-off revaluation gain of RM1.16 billion from the deconsolidation of TNG Digital reported earlier in the first quarter of financial year 2021 (1QFY21).

It added that the improvement in performance for 1HFY21 was also driven by higher operating income, strong cost containment and significantly lower provisions compared with the lower base results recorded in 1HFY20.

However, the bank said the profitability in 1HFY21 was partially offset by RM258 million mainly related to the write-off and accelerated amortisation of intangible assets in 2QFY21.

Meanwhile, six-month revenue rose 32.7% to RM10.63 billion from RM8.01 billion previously.

For 2QFY21 ended June 30, 2021, CIMB's net profit soared almost four times to RM1.08 billion from RM277.08 million a year ago. Revenue rose 20.83% to RM4.67 billion compared with RM3.87 billion a year prior.

It has declared a first interim dividend of 10.44 sen per share. In FY20, the group paid a total dividend of 4.81 sen, compared with 25 sen and 25 sen for FY17 and FY18, respectively, and 26 sen for FY19.

Shares of CIMB rose two sen or 0.41% to RM4.91 at the closing bell today, valuing the banking group at RM49.17 billion.  Over the past one year, the stock has gained 53% from RM3.20.

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