PETALING JAYA: CIMB Group Holdings Bhd posted a net profit of RM214.98 million for the fourth quarter ended Dec 31, 2020, 75% lower than RM848.64 million a year ago mainly due to higher loan provisions.
Its revenue was RM4.72 billion, 4.3% higher than RM4.52 billion in the previous year on the back of stronger fee-based non-interest income (NOII) and a relatively flat net-interest income (NII). The strong quarterly operating income was driven by group consumer banking’s improved wealth management performance and deposit growth, while group wholesale banking also made a significant contribution due to improved treasury and markets, and investment banking activities.
For FY20, its net profit fell 74% to RM1.19 billion from RM4.56 billion, while revenue was 3.4% lower at RM17.19 billion against RM17.80 billion in FY19.
Aggressive cost reduction targets were also exceeded with a 5.5% or RM524 million decrease in operating expenses leading to an improved cost-to-income ratio of 52.2%, down 1.2% y-o-y. Topline resilience, cost discipline and proactive measures to protect asset quality enabled the group to strengthen its financial position and ensure it remains well-capitalised against shocks, leading to its highest CET1 ratio of 13.3%. CASA also grew strongly by 22.6% in FY20, bringing the CASA ratio to 41.3% as at December 2020 from 34.4% in the previous year.
The group’s FY20 performance translated to an annualised return on average equity of 2.1% and earnings per share of 12.0 sen. It declared a proposed annual dividend of 4.81 sen per share, amounting to a total payout of RM477 million and a payout ratio of 40% in line with its dividend policy.
FY20 performance was largely impacted by the Covid-19 pandemic, resulting in elevated loan provisions arising from accounting adjustments incorporating macroeconomic factors and management overlays, as well as specific provisions made against Covid-19 related and legacy accounts. Against this backdrop, NII grew marginally to RM12.73 billion y-o-y despite a 14bps decrease in net interest margin (NIM) to 2.32% in FY20 due to the impact of lower interest rates and modification loss. As for NOII, stronger treasury and markets, wealth management, and investment banking activity in the second half of the year partially offset weakness in the first half, resulting in NOII of RM4.46 billion.
CIMB group CEO Datuk Abdul Rahman Ahmad said the challenging operating environment led to the introduction of its Forward23+ mid-term strategy in early Q4’20.
“As part of our plan to mitigate the challenging environment and strengthen our balance sheet, our most immediate priority was cost management, and in this regard we successfully surpassed our FY20 cost reduction target of 5% through rigorous cost optimisation measures.”
“Given the resilience of our underlying business and improved capital position, we declare a proposed annual dividend of 4.81 sen per share, based on a dividend payout ratio of 40% in line with our dividend policy. As a financial intermediary, we are conscious of our responsibility to preserve capital buffers whilst providing returns to our shareholders. We will continue to manage capital prudently as we seek to strike the optimal balance between the current and future needs of our business and our stakeholders,” added Abdul Rahman.
FY20 gross loans registered a slight decline of 1.0% y-o-y as the group took steps to de-risk its balance sheet and strengthen its financial position. Total deposits grew by 2.3% primarily due to 22.6% growth in CASA, and the CASA ratio continued to strengthen to 41.3% as at Dec-20 compared to 34.4% as at Dec-19. The group’s loan-to-deposit ratio stood at 89.0% (cf. 92.0%).
The group saw elevated loan provisions arising from accounting adjustments incorporating macroeconomic factors and management overlays, as well as specific provisions made against Covid-19 related and legacy accounts. Gross impaired loans ratio stood at 3.6% as at Dec-20, with an allowance coverage of 91.6%. The group’s loan loss charge for FY20 came in at 1.46%.
The group remains well-capitalised with its highest CET1 ratio of 13.3%, including the reinstatement of regulatory reserve from retained earnings, and a total capital ratio of 17.6% as at Dec-20. Liquidity management continues to be a priority, with liquidity coverage ratio remaining comfortably above 100% for all banking entities within the group.
Abdul Rahman said given the resurgence of Covid-19 and the necessary restrictions until the majority of the population have been vaccinated, the group will maintain a cautious growth stance in FY21.
“Enhanced risk management, prudent cost optimisation and targeted investments across the business will remain priorities as we seek to drive efficient growth. With expected lower provisions, we anticipate considerably better financial performance in FY21.
“Moving forward, FY21 will be the first full year of our Forward23+ strategy. We recognise that disciplined execution will be crucial to its success and have developed the necessary core programmes from the strategic themes of Forward23+ to ensure delivery of specific and measureable business outcomes. We have also begun reshaping our portfolio to ensure we are well-positioned to accelerate growth in key segments. In this context, digital is a main priority as online banking has become the primary banking experience for most customers, and we will continue to enhance our digital platforms to improve customer experience. At the same time, wealth management will also be a key growth driver regionally, and we look forward to introducing more bespoke and innovative solutions to meet our clients’ financial needs.”
The group is aware that borrowers continue to be impacted by the ongoing pandemic, and will continue to provide support to affected borrowers. In Malaysia, over the Covid-19 period, CIMB has provided financial payment relief assistance to around 150,000 individual & SME borrowers, amounting to RM19.43 billion, with an approval rate of virtually 100%.
