Published on 25 Nov 2021.
RAM Ratings has assigned ratings to debt instruments under CIMB Group Holdings Berhad’s (the Group) and CIMB Bank Berhad’s proposed RM15 billion Sukuk Wakalah Programmes, as outlined in Table 1.
The Group’s credit metrics have stayed intact since our last review in May 2021. As with other banks, the asset quality outlook for CIMB Group and its banking subsidiaries remains clouded by downside risks, particularly so for Indonesia and Thailand. The Group’s lending exposure to these countries constitutes nearly a quarter of its total loans. The continued availability of repayment assistance schemes across CIMB Group’s key markets further limits its visibility of the underlying credit quality of borrowers who opt for relief – these loans accounted for 21% of the Group’s loans as at end-July 2021. CIMB Group reported a headline gross impaired ratio of 3.4% as at end-June 2021 (end-December 2020: 3.6%).
While such relief measures have suppressed the level of bad loans, banks have been building up their provisioning buffers. CIMB Group’s full-year credit costs are likely to remain elevated in 2021, albeit lower than last year’s (2020: 145 bps). Its pre-tax profit rebounded to RM4.5 bil in 1H 2021 (1H 2020: RM0.9 bil) on the back of a stronger net interest margin, good traction in fees and trading income, as well as lower provisioning expenses (1H 2021: annualised 74 bps; 1H 2020: annualised 132 bps). The recovery momentum could, however, moderate in the second half of this year.
The improved profit performance led to the Group resuming interim dividends this year, to which it has elected to apply the dividend reinvestment scheme (DRS). CIMB Group’s post-dividend common equity tier-1 capital ratio remained healthy at 13.0%1 as at end-June 2021 (end-December 2019: 12.9%).
1 Adjusted to reflect the actual take-up rate of the DRS applicable to the interim dividend for FY Dec 2021, without which the indicator would have been 12.7%
Loh Kit Yoong
(603) 3385 2493
Wong Yin Ching
(603) 3385 2555
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad
Ratings on CIMB Group Holdings Berhad