KUALA LUMPUR (Feb 26): CIMB Group Holdings Bhd is targeting a loan growth of 4% to 5% for the current financial year ending Dec 31, 2021 (FY21), after reporting a contraction of 1% for FY20.
Group CEO Datuk Abdul Rahman Ahmad said the projected loan growth will be on the back of a significant growth in consumer banking across the group, particularly in Malaysia and Indonesia.
“We believe that the demand from the consumers remains strong,” he said at a virtual press conference today on the group’s FY20 financial results.
The bank’s group chief financial officer Khairul Rifaie said the mortgage and auto segments in Malaysia improved by 8.8% and 7.7% in FY20.
Other key performance indicators (KPIs) set for FY21 are return-on-equity (ROE) of 6-7%, return on average tangible common stockholder's equity (RoTCE) of 8-9%, loan loss charge (LLC) of 80-90 basis points, Common Equity Tier 1 (CET1) of more than 12.5% and cost-to-income ratio (CIR) of less than 52%.
For the entire group, the bank is also expecting the net interest margin (NIM) to be flat and a margin expansion of 10 basis points.
While CIMB remains committed to its dividend policy of 40%60%, an interim dividend payment for FY21 will depend on the bank’s capital position and the economic situation at that particular point of time.
“We need to balance the need of stakeholders, as well as our need to preserve capital, to ensure that we have enough resources to withstand any economic headwinds,” said Rahman.
In FY20, CIMB reported a 2.6% RoTCE, along with LLC of 1.46%, CET1 of 13.3% and CIR of 52.2%.
“In 2021, we have set ambitious targets and to deliver better financial performance compared with 2020. I’m confident and optimistic, assuming that the economic recovery continues, that we will deliver on our targets,” said Rahman.
“We have been affected significantly in 2020. I think we need to be realistic [in terms of setting our KPIs], that we need to achieve gradual growth in terms of recovery,” he added.
On prospects, Rahman believes that the financial industry will still remain challenging, as the bank’s performance is highly correlated with the economic growth, given the resurgence of Covid-19 infections and the ongoing uncertainty.
While he sees an economic rebound, Rahman said the recovery will remain patchy and uncertain with downside risks, as it will take time for the national Covid-19 vaccination programme to be completed.
“However, we are confident that the second half of the year will be a lot stronger. With that, we expect the financial industry performance to rebound, particularly as provisions come down,” said Rahman, adding that 2021 will be a pivotal year for the bank.
“We have also begun reshaping our portfolios to ensure we are well-positioned to accelerate growth in key segments,” he said.
Rahman noted that digital is a main priority, as online banking has become the primary banking experience for most customers, and CIMB will continue to enhance its digital platforms to improve customer experience.
“At the same time, wealth management will also be a key growth driver regionally, and we look forward to introducing more bespoke and innovative solutions to meet our clients’ financial needs,” he said.
On its 51%-owned TNG Digital, Rahman said: “We are very pleased with the accelerated growth strategy that has been delivered at TNG Digital. We believe that it is the right time for TNG Digital to undertake a fundraising.”
"We are in the midst of the exercise, so are unable to comment. We would be able to give more comment once the exercise is completed, which is forthcoming," he added.
CIMB’s shares closed unchanged at RM4.33 today, valuing the bank at RM42.97 billion. The counter gained some 49% from last year’s low of RM2.90 back in November.