PETALING JAYA: CIMB Group Holdings Bhd’s net profit for the second quarter ended June 30, 2020 fell 81.6% to RM277.08 million from RM1.51 billion a year ago affected by the challenging economic environment caused by Covid-19, which led to modification loss arising from the moratorium given to borrowers, as well as elevated provisions due to macroeconomic factors and specific credit provisioning.
Revenue declined 13.5% to RM3.87 billion RM4.47 billion due to the impacted of the modification loss on NII and lower NIM during the period.
For the first half period ended June 30, 2020, its net profit was 70.9% lower at RM785.00 million against RM2.70 billion last year, while revenue declined by 7.3% to RM8.01 billion RM8.63 billion primarily due to a 27.6% drop in non-interest income (NOII) to RM1.86 billion versus RM2.57 billion in H1’19 due to lower fee and trading income in line with weaker economic activity.
However, net interest income (NII) grew by 1.4% YoY to RM6.15 billion, showing solid momentum despite the modification loss for the period and slight decrease in net-interest margin (NIM) to 2.29%. Excluding the modification loss, the group’s H1’20 NIM was only 7bps lower at 2.39%.
This translates to a lower annualised return on average equity of 2.8% and net earnings per share of 7.9 sen.
The group’s underlying business however, remains resilient with positive growth in gross loans and deposits and significant CASA growth. CIMB also outlined its intention to undertake rigorous cost optimisation measures and proactively strengthen its balance sheet in order to mitigate the impact of the challenging economic environment. The group’s capital position remains strong with its common equity tier 1 (CET1) ratio at 12.9%, backed by healthy liquidity support.
CIMB group CEO Datuk Abdul Rahman Ahmad said the subdued performance in Q2’20 came within expectations and was largely attributed to the impact of Covid-19.
“Moving ahead, we expect continued weaker performance for the remainder of 2020 in line with uncertain economic conditions, as we recognise elevated provisions arising from the impact of macroeconomic factors under MFRS9 and take impairments on specific accounts outside Malaysia to strengthen our financial position. Our underlying business remains resilient, loans and deposits grew 3.9% and 7.8% respectively, driving NII to grow by 6% YoY, excluding modification loss impact.
“To mitigate the impact of the challenging economic environment, we aim to aggressively rationalise cost. Cost on an absolute basis has already declined by 3.3% for H1’20, and we target an absolute cost reduction of around RM500 million or 5% for full year 2020. The group continues to be well-capitalised to withstand shocks through our prudent approach with a strong CET1 ratio and liquidity coverage ratio remaining comfortably above 100%,” Abdul Rahman added.
Abdul Rahman said the short term economic outlook will remain challenging. In recognition of the new challenges posed by a fluid and uncertain economic landscape, it is recalibrating its mid-term Forward23 plan to ensure the group is well positioned to take advantage of economic recovery.
“In the meantime, the group will continue to be prudent and maintain the utmost discipline in managing both risk and asset quality. Our priority remains on supporting customers affected by the pandemic, especially in Malaysia, as we approach the end of the blanket moratorium in September. We are committed to continue providing extended relief and support to affected customers with CIMB’s Targeted Assistance Programme. These customised relief options are aimed at providing temporary breathing space to help our customers get back on their feet again.”
As at end-June, CIMB group’s Covid-19 financial assistance initiatives have benefitted over 1.25 million retail customers and around 16,000 SMEs and corporate clients in terms of cash flow alleviation. The group’s support for affected customers in Malaysia will continue post-moratorium via its Targeted Assistance Programme, in line with the government’s extended Covid-19 relief initiatives.
source https://www.thesundaily.my/business/cimb-q2-net-profit-lower-at-rm27708m-affected-by-modification-loss-FF3722171
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