KUALA LUMPUR (Feb 28): CIMB Group Holdings Bhd has undertaken a provision of RM281 million for the recent double-crediting error in the financial year ended Dec 31, 2021 (FY21), which affected 11,800 of its customers, said group chief executive officer Datuk Abdul Rahman Ahmad (pictured).
Further, the bank said that there is potentially an additional final provision in 1QFY22 in relation to the error following further engagement with customers, but added that the amount will be smaller, and that the bank “does not expect” it to have a material impact on its FY22 targets, Abdul Rahman said.
“Funds from the duplicate credit were drawn from our banks’ own money, and as such, that excess amount received by customers have to be recovered from them.
“We are fully committed to adhering to BNM’s policy on Fair Treatment of Financial Consumers. This includes providing clear evidence and documentation of the double credit in their bank statements, and formulating flexible repayment schemes based on the individual circumstances,” Abdul Rahman said during the banking group’s briefing for its fourth quarter ended Dec 31, 2021 (4QFY21) results.
At the same time, immediate actions had been taken by the group to fix and remedy the error, he said.
“Additional controls have been implemented to prevent similar incidents recurring in the future. [There has been a] Major review of mitigating controls and policies and procedures surrounding our transaction processing infrastructure.
“We wish to categorically state that our system remains secure and there had been no system breaches,” Abdul Rahman added.
For the whole of FY21, CIMB booked RM2.61 billion in expected credit losses on loans, advances, and financing at amortised cost, from RM5.34 billion in FY20.
“However, provisions remained relatively elevated in 4QFY21 due to overlays, top-up provisions taken on legacy credit accounts impacted by the pandemic, as well as provisions taken on customers’ other receivables,” Abdul Rahman said.
For FY22, the group targets a loan loss charge of 60 to 70 basis points (bps), which is an improvement from 73 bps in FY20, with a lower figure for Malaysia, said group chief financial officer Khairul Rifaie.
“For Malaysia, we are targeting a credit cost of between 30 to 40 bps,” Khairul said.
Sees FY22 ROE at 7%-8% with Cukai Makmur
Excluding the provisions, CIMB’s pre-provisioning operating profit for the financial year ended Dec 31, 2021 (FY21) came in at RM9.43 billion.
“This already exceeded pre-pandemic 2019 levels of RM8.3 billion, reflecting our positive underlying recovery,” Abdul Rahman said.
For FY22, the group expects to sustain its return on equity (ROE) performance at 7%-8% after taking into account the one-off Cukai Makmur, compared with reported ROE of 7.5% for the whole of last year.
The banking group also targets its loans growth to recover to 5%-6%, Abdul Rahman said. CIMB’s loans growth was slightly below expectations at 3.3% in 2021, from a contraction of 1% in 2020.
Separately, Abdul Rahman said the group will invest close to RM1.2 billion in 2022 to accelerate its digital transformation, with a roll-out of its new digital banking platform in Malaysia expected this year.
Abdul Rahman pointed out that costs are expected to increase in 2022 predominantly in human capital and technology investments, but the group will “make sure that cost escalation is contained”.
The group saved close to RM500 million in core operating expenses in FY20, and saw a 1.8% year-on-year increase in FY21 to RM8.94 billion, which contributed to the improvement in core cost-to-income ratio to 48.6% for FY21, from 51.7% in FY20.