KUALA LUMPUR (May 31): CIMB Group Holdings Bhd posted its highest-ever quarterly net profit in its first quarter ended March 31, 2021 (1QFY21), registering earnings of RM2.46 billion from RM507.93 million a year prior.

In a bourse filing, the group explained that the substantially higher net profit had included a one-off revaluation gain of RM1.16 billion from the deconsolidation of TNG Digital, a business jointly founded by CIMB’s wholly-owned subsidiary Touch 'n Go (TNG) and Ant Group.

The banking group explained that this was the result of a successful third party investment in TNG Digital, which operates the Touch 'n Go eWallet.

“The revaluation gain from the deconsolidation arose pursuant to TNG Digital successfully receiving its first third-party investment of approximately RM200 million from a limited partnership fund managed by a US-based private equity firm which invests in online and mobile payment ecosystem companies globally.

"This investment is part of an ongoing fundraising exercise undertaken by TNG Digital to accelerate its growth and expansion plans. TNG Digital’s fundraising initiatives will continue through 2021. The group expects TNG to still remain the single largest shareholder of TNG Digital when the exercise fully completes,” it further explained.

Excluding this gain, the group noted that its profit before tax increased 144% year-on-year (y-o-y) to RM1.74 billion from RM714 million.

The group’s core pre-provisioning profit rose 35% y-o-y to RM2.46 billion from RM1.83 billion, while core net profit grew by 156.1% y-o-y to RM1.3 billion from RM508 million.

This translates into a core annualised return on average equity (ROE) of 9.3%.

Its latest quarterly revenue increased by 43.78% to RM5.96 billion from RM4.14 billion in 1QFY20.

The financial services company did not declare a dividend in its latest financial quarter.

CIMB added that its 1QFY21 core operating income grew 15.9% y-o-y to RM4.8 billion from RM4.14 billion. Net interest income (NII) grew 8% y-o-y to RM3.47 billion on improved net interest margins in Malaysia and Indonesia. Core non-interest income (NOII) strengthened by 43.2% to RM1.33 billion on stronger wealth management and trading income.

Its cost-to-income ratio (CIR) improved to 48.7%, from 52.2% in FY20, as it continues to undertake stringent cost optimisation measures.

Total provisions declined by 33% y-o-y to RM756 million on recoveries in legacy accounts and the absence of large impairments.

Meanwhile, gross loans rose 0.7% y-o-y, deposits increased 3.3% y-o-y and its current account savings account (CASA) showed a 19.8% y-o-y growth, with its CASA ratio strengthening to 42.3% as of end-March, from 41.3% in December 2020.

Its common equity tier 1 (CET1) ratio stood at 12.9% as of March, from 13.3% at end-December on risk-weighted assets (RWA) optimisation initiatives.

The banking group commented that the strong performance seen in 1QFY21 is an early indicator of recovery, which is underpinned by the resilience of its underlying business.

CIMB group chief executive officer Datuk Abdul Rahman Ahmad said in a statement: “The strong performance seen in the first quarter is an early indicator of recovery, underpinned by the resilience of our underlying business. I’m pleased to see positive momentum across all our businesses, with especially strong y-o-y income growth in our wholesale banking and consumer banking businesses. 

"Our digital businesses also registered healthy growth, as CIMB Philippines reached 3.5 million customers, while TNG Digital achieved 15.5 million registered users. 

“Our cost optimisation initiatives also continue to bear fruit, as we were able to further lower our CIR to 48.7%. While it may be too early to tell given the pandemic’s resurgence causing ongoing risk to economic recovery, the positive start to FY21 signals that we are moving in the right direction on our Forward23+ strategic plan.”

CIMB’s stock ended seven sen or 1.61% lower today at RM4.28 with a market capitalisation of RM43 billion.