This article first appeared in The Edge Financial Daily, on May 27, 2016.

KUALA LUMPUR: CIMB Group Holdings Bhd posted a net profit of RM813.8 million or 9.54 sen per share, for the first quarter ended March 31, 2016 (1QFY16), a 40% year-on-year (y-o-y) jump from RM580.12 million or 6.9 sen per share a year ago.

Lower costs and loan provision had boosted the banking group’s quarterly earnings in 1QFY16. However, in the previous corresponding quarter CIMB incurred massive RM202 million investment banking restructuring costs.

Excluding the restructuring costs in the previous corresponding quarter, CIMB’s net profit would have been RM782 million in 1QFY15. This would translate into a much smaller increment of 4.1% in the quarter under review.

Segmentally, CIMB said its regional consumer bank’s pre-tax profit gained 36% y-o-y in 1QFY16 to RM557 million from RM411 million, accounting for about half of the group’s pre-tax profit, spurred by consumer loans growth across the region and lower consumer provisions.

Meanwhile, its commercial banking division registered a 22% y-o-y decline in pre-tax profits to RM146 million, due to higher provisions in Indonesia, Thailand and Singapore.

In a filing with Bursa Malaysia, the banking group’s revenue or operating income for the period rose 1.2% to RM3.73 billion from RM3.68 billion a year prior.

“The group posted a respectable performance for 1QFY16 despite the difficult operating conditions across the region, with y-o-y improvements in our consumer, wholesale banking and group asset management and investment divisions,” said CIMB group chief executive Tengku Datuk Seri Zafrul Aziz in a statement.

Its regional wholesale banking division saw a 25% y-o-y increase in profit, while its group asset management and investment division saw 44% y-o-y growth.

Geographically, the group said profit contribution from its non-Malaysian operations increased to 26%, compared to 20% in the previous year, due to better performance in Indonesia, in line with lower provisions at PT Bank CIMB Niaga Tbk.

Thailand’s contribution also saw an improvement of 52% y-o-y, while its Singapore operations recorded a 42% fall in pre-tax profit.

In terms of key operating ratios, the group’s loan-to-deposit ratio stood at 90.6% in 1QFY16 compared to 90.3% in 1QFY15, gross impaired loans ratio improved to 3% from 3.2%, while its cost-to-income ratio was lower at 57.4%, compared to 58% in the previous year.

Its net interest margins were lower at 2.62%, attributed to the higher cost of deposits in Malaysia. CIMB’s total capital ratio stood at 15.4%, while the common equity tier 1 (CET1) capital ratio strengthened to 10.6%.

Looking ahead, Tengku Zafrul said the group will continue to adopt a cautious view on overall balance sheet growth, focusing on cost management, asset quality, capital management and governance, amid the challenging environment.

“We have made significant progress on various T18 programmes implemented in 2015, resulting in, among others, a firmer control of our operating expenses, as well as an improved CET1 ratio of 10.6%.

“For the rest of 2016, we expect a slower growth environment at CIMB Malaysia. We also foresee a gradual improvement at CIMB Niaga through the year. Thailand and Singapore will see selective growth areas, coupled with close monitoring of asset quality,” said Tengku Zafrul.