KUALA LUMPUR (Feb 4): With the recent overnight policy rate cut (OPR) to 2.75% last month, CIMB Group Holdings Bhd's group chief executive officer Tengku Zafrul Aziz (pictured) says the bank is expecting a 3 to 4 basis points (bps) net interest margin (NIM) compression for the full year of 2020.

Speaking to reporters on the sidelines after the press conference on Malaysia's trade performance in 2019, Zafrul said the recent cut in interest rate will have an impact on the bank's topline.

"Of course, it (OPR cut) will impact the whole industry. We as a bank need to make sure that we focus on areas that we can improve on to mitigate any shock.

"As you know OPR cut have very small impact… there are other issues like coronavirus recently; we also have to be mindful of other external shock that might happen. Performance of a bank (is) very highly correlated with the GDP (gross domestic product).

"If (the) economy does better, we will obviously benefit. If (the) economy is impacted by all this external shock, banking industry will also been impacted," said Zafrul.

Thus, similar to how the bank has addressed this same issue last year, Zafrul said the bank has to relook at managing its investment portfolio. "We were able to mitigate the impact [last year] by optimising some of our investments that we want to make."

Zafrul said the bank will need to look at optimising the investments to ensure its cost-to-income ratio, efficiency as well as productivity continues to improve as margin will be further compressed going forward for this industry.

When asked about the possibility of another rate cut, Zafrul noted that the market consensus is that the banks are anticipating one in the second half of this year. "But again, the market has been wrong before," said Zafrul.

At the noon market break, CIMB shares were up six sen or 1.24% at RM4.91, valuing the bank at RM48.72 billion. Some 3.26 million shares were traded.