KUALA LUMPUR (May 20): CIMB Group Holdings Bhd, the country's second-biggest lender, saw its net profit plunged 45.6% to RM580.12 million or 6.89 sen per share in the first quarter ended March 31, 2105 (1QFY15) from RM1.07 billion or 13.15 sen per share a year ago, mainly due to higher corporate loan provisions from Indonesia.

Revenue for 1QFY15, however, rose 4% to RM3.68 billion from RM3.54 billion in 1QFY14.

In a statement today, CIMB group chief executive Tengku Datuk Zafrul Tengku Abdul Aziz said the group has started on a better note after a difficult end to 2014.

“Our core banking operations are performing well, especially the consumer and commercial banking segments,” he said.

“Despite the continued challenging environment, we are pleased with the 4% year-on-year (y-o-y) growth in operating income and much improved quarter-on-quarter (q-o-q) profitability," he added.

CIMB said operating expenses were 6.3% higher y-o-y, on the back of increased personnel expenses.

However, its operating income in 1QFY15 grew 4% y-o-y to RM3.68 billion underpinned by a 4.7% expansion in net interest income and a 2.5% growth in non-interest income.

Geographically, CIMB said non-Malaysian pre-tax profit contribution to the group was lower at 20% in 1QFY15 compared with 38% in 1QFY14, principally due to the 89.4% y-o-y decline in Indonesia’s pre-tax profit to RM45 million from lower PT Bank CIMB Niaga Tbk (CIMB Niaga) earnings.

Thailand's pre-tax profit contribution to the group also declined 23.9% y-o-y to RM54 million following increased corporate banking provisions in 1QFY15.

However, total pre-tax profit contribution from Singapore expanded by 46.1% to RM109 million as both the bank and securities operations performed better.

CIMB said its total gross loans (excluding the declining bad bank loan book) expanded 12.8% y-o-y.

Over the same period, total deposits grew by a similar 12.8% y-o-y, with loan to deposit ratio (LDR) slightly lower at 90.3% compared to 90.7% previously.

The group’s gross impairment ratio rose to 3.2% as at March 2015 from 3.1% in March 2014, with a higher allowance coverage of 84.2% as at March 2015.

Going forward, Tengku Zafrul said 2015 looks challenging and the group is remaining cautious given the regional economic environment and the moderation in consumer spending in Malaysia.

“We will continue to focus on cost management and operational streamlining, at the same time continue to ensure core operations remain robust,” he said.

“It is early days yet, but the changes and decisions we have taken in line with Target 18 plans (T18) are starting to show some results, and we will continue to be single minded and focused on the execution our plans,” he added.

Tengku Zafrul noted that CIMB Singapore continues to perform positively with continued business growth, while CIMB Thai will likely show operational improvements despite the uncertain macroeconomic environment.

“And as expected, CIMB Niaga remains challenged by near term asset quality concerns in light of ongoing economic uncertainties,” he added.

CIMB (fundamental: 1.05; valuation: 1.65) shares closed one sen or 0.17% higher at RM6.01 today, with a market capitalisation of RM51.02 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.)