Published on 29 Aug 2024.
RAM Ratings has affirmed the AA1/Stable/P1 corporate credit ratings (CCRs) of CIMB Group Holdings Berhad (the Group) and the AAA/Stable/P1 financial institution ratings (FIRs) of CIMB Bank Berhad, CIMB Islamic Bank Berhad and CIMB Investment Bank Berhad. We have also affirmed the ratings of these entities’ debt facilities (Table 1) and assigned P1 ratings to CIMB Bank’s Proposed RM10 bil Commercial Papers Programme and CIMB Islamic’s Proposed RM10 bil Islamic Commercial Papers Programme.
Our rating actions reflect CIMB Group’s well-recognised franchise in ASEAN and Malaysia, its favourable funding profile and sturdy capital buffers. The Group’s credit profile is further supported by improved profitability, driven by its exit from low-return segments and multi-year cost optimisation measures under its Forward23+ strategy. Considering CIMB Group’s systemic importance as the second-largest banking group in Malaysia, we believe the government will provide extraordinary support if needed. Relative to its domestic peers, CIMB Group’s asset quality is constrained by its exposure to the higher-risk markets of Indonesia and Thailand, which together make up about 23% of its loan book. This, along with periodic large impairments across the Group’s key markets, has kept its gross impaired loan (GIL) ratio (end-March 2024: 2.6%) higher than similarly rated peers’.
Ongoing challenges in the Group’s Thai auto lending portfolio and inflationary pressures from planned subsidiary cuts in Malaysia pose some downside risks, but we do not expect these factors to materially weaken its overall asset quality. The management expects the Group’s credit cost ratio to stay within the normalised levels of 30 bps-40 bps this year (FY Dec 2023: 36 bps). A stronger GIL coverage ratio of 111.3% as at end-March 2024 (end-December 2022: 96.2%) will also help cushion any potential rise in defaults.
The continued elevated cost of funds exerted pressure on CIMB Group’s interest margins in FY Dec 2023, mirroring broader industry trends. Despite this, pre-tax profit amounted to RM9.5 bil (+14.0% y-o-y) for the year, fuelled by a jump in non-interest income and a substantial drop in net impairment charges. This translated to a healthier return on assets of 1.4% and return on risk-weighted assets of 2.8% (FY Dec 2022: 1.3% and 2.6%, respectively). With credit costs expected to remain manageable and margin pressures easing, we expect the Group to sustain recent gains in its underlying profitability.
CIMB Group’s core subsidiaries in Malaysia – CIMB Bank, CIMB Islamic Bank Berhad and CIMB Investment Bank Berhad – which are operationally integrated into the Group’s universal banking platform, are all rated AAA/Stable/P1. The one-notch difference between CIMB Group’s long-term CCR and the long-term FIRs of its banking subsidiaries reflects the former’s structural subordination as a non-operating holding company.
Table 1: Ratings of CIMB Group and domestic entities under our coverage
Analytical contacts
Amy Lo
(603) 3385 2509
amy@ram.com.my
Wong Yin Ching, CFA
(603) 3385 2555
yinching@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
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Published by RAM Rating Services Berhad
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Rating Rationale: CIMB Group Holdings Berhad & CIMB Bank Berhad
Rating Rationale: CIMB Islamic Bank Berhad