CIMBT mulling M&A for fast expansion
CIMB Thai Bank (CIMBT) aims to become a mid-sized bank by 2022 and explore opportunities for mergers and acquisitions (M&A) to enable rapid expansion.
Upgrading to the Asean-focused midtier category in Thailand, particularly in asset size and profitability, is part of the bank’s five-year transformation programme, said president and chief executive Kittiphan Anutarasot.
To achieve the goal of joining mid-tier lenders, the bank is required to record an annual pre-provision operating profit of 15 billion baht, Mr Kittiphan said, adding that the bank posted 5.50 billion baht in pre-provision operating profits last year.
A larger bank size provides a buffer through crises, as well as economies of scale and a competitive edge.
“For instance, the bank was dealt a larger blow, relative to bigger banks, when loans to a large corporate customer turned sour last year,” Mr Kittiphan said.
CIMBT was the worst performer among its peers for the first three months of 2017. The Thai unit of Malaysia’s CIMB Group Holding Bhd reported a 63% year-on-year fall in first-quarter net profit to 121 million baht, largely due to a 7% year-on-year increase in loan-loss provisions to 1.23 billion baht to cushion against higher nonperforming loans (NPLs).
The bank’s consolidated NPLs amounted to 11.2 billion baht at the end
of March, and its gross NPL ratio dropped to 5.3% at the end of March from 6.1% at the end of December.
On average, local mid-sized banks’ asset size are 3-4 times that of CIMBT’s, and large lenders’ are larger than the bank’s by 5-10 times. CIMBT’s total assets stand at 292 billion baht.
CIMB, the Malaysia-based banking group, ranks as the region’s fifth financial institution and uses M&As for expansion. It now owns a 93.7% stake in CIMBT and is opening the subsidiary to inorganic growth strategies.
The Thai bank’s profit represents around 6% of the group’s total profit and, excluding Malaysia, it is the second-largest contributor to the group in Southeast Asia after Indonesia.
The bank’s transformation plan is divided into three phases: the first phase during 2017-18 concentrates on foundation strengthening; the second phase through 2020 focuses on business growth; and the final phase to 2022 focuses on upgrading to a mid-tier bank.
CIMBT will focus on asset quality and profitability under the first phase of the transformation plan, Mr Kittiphan said.
The bank aims to bring down its cost-toincome ratio to 50% by 2018 from 57.4% in 2016, and raise its first-tier capital to 11% from 10.7% and return on equity to 10% from -2.3%.
CIMBT has revamped several areas that have high growth potential, particularly retail banking, wealth management, small and medium enterprises, and treasury.
The bank is maintaining a 5-10% growth in its total loans this year.
CIMBT shares closed yesterday on the Stock Exchange of Thailand at 1.26 baht, down eight satang, in trade worth 9.9 million baht.