CIMB sees moderation in loan growth

Strong demand in first half despite OPR hike

“It is natural in a rising interest-rate environment that demand for loans will be affected.” Datuk Abdul Rahman Ahmad

KUALA LUMPUR: CIMB Group Holdings Bhd expects a “moderation” in loan growth, moving forward, should there be continued rise in the overnight policy rate (OPR).

“It is natural in a rising interest-rate environment that demand for loans will be affected.

“But in the first half of the year, both ours and the industry loan growth has been very strong,” group chief executive officer Datuk Abdul Rahman Ahmad said at a briefing.

He said loan growth had been strong despite the recent rise in the OPR due to the bounce following the resumption in economic activities from last year.

“A lot of consumers are buying capital (intensive) items such as houses and cars. But we expect this to probably moderate – it won’t be severely affected as interest rate rises and the cost of interest servicing becomes more expensive,” he added.

Abdul Rahman said CIMB Group still expects to exceed or meet its loan growth target for the year of 5% to 6%.

The group said in a statement that total gross loans for the quarter ended June 30 rose by 6.8% to Rm394.3bil year-on-year (y-o-y) while total deposits grew by 5.7% y-o-y to Rm444.3bil.

CIMB Group said it registered a loan-to-deposits ratio of 88.7% as at June 30, which is an improvement of 1.5% from 87.2% in the preceding quarter.

Its current account savings account (CASA) also improved by 7.3% y-o-y, with the CASA ratio recording 42.3% as at June 30.

In its second quarter, CIMB Group said its net profit rose by 18.2% y-o-y to Rm1.28bil while revenue increased by 5.67% to Rm4.88bil. Earnings per share for the quarter rose to 12.3 sen.

The group has also proposed a first interim dividend of 13 sen per share – comprises 2.60 sen in cash and 10.40 sen in dividend reinvestment scheme – which amounts to Rm1.36bil (a payout ratio of 50%).

“Compared with the second quarter of 2021, the group’s operating income was higher by 5.7% on the back of strong asset growth, mainly from the consumer and corporate Malaysia segments. This, together with lower provisions, resulted in a pre-tax profit growth of 17.5% y-o-y,” it said.

Abdul Rahman said: “Strong top line growth, continued cost discipline and lower provisions across all businesses and markets have contributed to the positive performance in the first half of the year.

“We are seeing an uptrend in our loans and deposits, which recorded healthy growth of 6.8% and 5.7%, respectively, as efforts to reshape our portfolio are starting to crystallise.”

Moving forward, the group said it expects provisions to remain “broadly stable”.

Meanwhile, Abdul Rahman said incidences of frauds and scams have been on a rise and that the group takes account security very seriously. “But this is also a joint responsibility between the bank and customers. If an account is a mule account, we will freeze the account,” he said.

On speculation that it may exit the CGSCIMB Securities International Pte Ltd (CSI) and CGS-CIMB Holdings Sdn Bhd (CCH) joint-venture (JV) companies, he said: “On our end, it’s less about exiting the business but more about whether our partner would like to increase their stakes in the JV companies.”

Following a sale late last year, CIMB Group’s interest in CSI and CCH have been reduced

from 50% and 50% to 25.01% and 25%, respectively, while its JV partner China Galaxy International Financial Holdings Ltd’s interest in the JV companies increased to 74.99%

and 75%, respectively.