This article first appeared in The Edge Financial Daily on October 23, 2019

KUALA LUMPUR: CIMB Group Holdings Bhd’s 94.83%-owned CIMB Thai Bank PCL’s net profit for the nine months ended Sept 30, 2019 (9MFY19) rose 35.5% year-on-year (y-o-y) to 728.1 million baht (about RM100.52 million), on a 2.3% growth in operating income and a 32.7% decline in provisions, partially offset by a 17.4% increase in operating expenses.

In a statement yesterday, CIMB Thai president and chief executive officer Adisorn Sermchaiwong said y-o-y, operating income rose 2.3% or 236.4 million baht to 10.4 billion baht from a 3.1% increase in net interest income, on loan expansion, a higher interest income on investments and 97.8 million baht or 6.8% in net fee and service income arising from higher fees from insurance and underwriting.

He said other operating income decreased 13.4% or 103.7 million baht, mainly attributed to losses on financial instruments designated at fair value through profit or loss offset by gains from tradings and foreign exchange transactions.

Sermchaiwong said operating expenses rose 17.4% or 1.1 billion baht, largely due to higher general expenses and personnel cost attributed to an amendment bill for the Labour Protection Law requiring a higher compensation for retired employees or those in service for over 20 years.

“Coupled with expenses incurred from the Fast Forward expansion strategy, the cost-to-income ratio was higher at 68.8% in 9M2019 compared with 59.9% in 9M2018,” he said.

Its net interest margin over earning assets stood at 3.32% in 9MFY19, compared with 3.77% in 9MFY18, owing to a higher cost of funds.

CIMB Thai said as at Sept 30, 2019, the total gross loans, inclusive of loans guaranteed by other banks and loans to financial institutions, stood at 240.2 billion baht — up 5.5% from Dec 31, 2018.

It said deposits, inclusive of bill of exchanges, debentures and selected structured deposit products, stood at 238.2 billion baht — up slightly at 1.7% from 234.3 billion baht as at end-December 2018.

It said the modified loan-to-deposit ratio rose to 100.9% compared with 97.2% as at Dec 31, 2018.

CIMB Thai said gross non-performing loans (NPL) stood at 11.1 billion baht, with an equivalent gross NPL ratio of 4.6% from 4.3% as at Dec 31, 2018, arising from certain corporate accounts and retail segments.

“CIMB Thai continues to exercise rigorous standards for credit risk underwriting and risk management.

“The bank also continues to focus on improving productivity, monitoring collection and managing all accounts closely and effectively,” said Sermchaiwong.

CIMB Group shares shed two sen to RM4.96, with a market capitalisation of RM48.25 billion.