CIMB sees loan growth boosting earnings after Q4 profit beats forecasts

A man walks out of a CIMB Bank in Kuala Lumpur.
A man walks out of a CIMB Bank in Kuala Lumpur. PHOTO: REUTERS

HONG KONG (REUTERS) - Malaysian lender CIMB Group Holdings on Tuesday (Feb 28) beat expectations with a 3.5 per cent rise in fourth-quarter profit and said it was optimistic about business prospects in 2017, based on improved loan growth and lower costs.

The net profit in the December quarter at CIMB, the second-largest lender by assets in Malaysia, was bolstered by an 8.7 per cent increase in credit demand in its home market as well as in neighbouring Indonesia and Thailand.

Malaysian lenders including Malayan Banking Bhd (Maybank) , the country's largest lender by assets, and CIMB have benefited from cost cutting and stronger demand for corporate loans in the domestic market.

CIMB's net profit for the quarter ended in December 2016 was RM854.4 million (S$269.7 million), up from RM825.7 million a year earlier and beating analysts' average estimate of RM805 million according to Thomson Reuters data.

Maybank last week reported a 43 per cent rise in fourth-quarter profit on loan growth and a rise in investment income, and forecast stronger loan growth in its core markets of Malaysia and Indonesia.

Malaysian lenders' earnings prospects for the current year have been aided by the country's improved economic outlook after being hobbled over the past couple of years by slumping oil and gas prices and slowing demand from top trade partner China.

A financial and political scandal at state-fund 1Malaysia Development Berhad (1MDB) has also dented sentiment.

Malaysia's economy grew 4.5 per cent in the fourth quarter from a year earlier, ending a year of tepid growth on a stronger note helped by solid exports and resilient domestic demand.

"The group is optimistic for 2017 on the back of sustainable loan growth, continued cost controls and expected improvement in provisions," CIMB said in its earnings statement filed with the stock exchange.

It posted an 11.1 per cent rise in bad loans provisions last year from 2015.

The bank's cost-to-income ratio improved to 53.9 per cent in 2016, down from 55.6 per cent in the year-ago period, bringing it closer to its target of 50 per cent by end of next year.

CIMB said in December it had agreed to sell its 18.2 per cent stake in China's Bank of Yingkou Co Ltd, valued at RM972 million, to investment holding company Shanghai Guozhijie Investment Development Co Ltd.

CIMB shares were trading 0.6 per cent higher in the afternoon, in a slightly weaker broader market.