Friday, Jul 08, 2022
MARC Ratings has affirmed its long-term and short-term corporate credit ratings of AA+/MARC-1 on CIMB Group Holdings Berhad (CIMB Group) and its issue rating of AA on the group’s RM10.0 billion Basel III-compliant Tier 2 Subordinated Debt Programme. The ratings outlook is stable.
CIMB Group is a non-operating financial holding company and is the country’s second-largest banking group with total assets of RM632.6 billion as at end-1Q2022. CIMB Bank Berhad remains its core operating entity, accounting for 84.8% of total consolidated assets as at end-1Q2022 and historically contributing a substantial portion of dividend income to the group. CIMB Group’s long-term rating of AA+ reflects its subordination to CIMB Bank (AAA/Stable). CIMB Group’s affirmed ratings are premised on the group’s status as a domestic systemically important bank which hinges on CIMB Bank’s significant market position in loans and deposits in the domestic banking industry.
For 1Q2022, CIMB Group recorded pre-tax profit of RM2.0 billion (1Q2021: RM2.9 billion); the higher earnings in 1Q2021 were due to disposal of subsidiaries for RM1.2 billion. During the period, loan book grew by 5.0% y-o-y to RM384.7 billion on the back of resumption of economic activities. Of its key operating markets, domestic loans accounted for 63.0% of its loan book, followed by Indonesia (14.9%) and Thailand (7.7%).
Gross impaired loans ratio remained stable at 3.44% as at end-1Q2022 (1Q2021: 3.44%) as the group continued to provide relief measures as well as undertake restructuring and rescheduling to manage its asset quality. Its capitalisation remains strong and provides the capacity to absorb potential shocks from any credit impairments once the extended relief measures end; Common Equity Tier 1, Tier 1 and total capital ratios stood at 13.8%, 14.7% and 17.6%.
For 2021, CIMB Group received dividend income of RM582.6 million that was sufficient to meet its debt obligations. Its debt-to-equity ratio was stable at 0.52x, with borrowings declining slightly to RM14.3 billion. Borrowings, however, remained on the high side since 2016, largely due to Basel III-compliant sub-debt issuances. As these issuances are invested in similar capital instruments issued by its banking subsidiaries, the debt servicing costs under the issuances have been met by cash flows from its subsidiaries.
Contacts:
Farhan Darham, +603-2717 2945/ farhan@marc.com.my
Haziq Najmuddin, +603-2717 2965/ haziq@marc.com.my
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my