Rating action             

MARC Ratings has affirmed CIMB Bank Berhad’s financial institution (FI) ratings at AAA/MARC-1 and the bank’s existing RM10.0 billion Basel III-compliant Tier 2 Subordinated Debt Programme rating at AA+. The ratings outlook is stable.

CIMB Bank’s high systemic importance in the domestic banking industry, well-established banking franchise and strong market position in loans and core deposits remain key rating drivers. It is the core banking subsidiary of CIMB Group, designated a domestic systemically important bank (D-SIB) by Bank Negara Malaysia (BNM). CIMB Bank’s instrument rating reflects the relative loss severity risk profiles of the subordinated debt. 

CIMB Bank is the second-largest domestic bank with an asset size of RM653.4 billion, accounting for a sizeable 17.5% of total loans and 23.3% of core deposits of the domestic banking industry as at end-1Q2024. Loan book grew marginally to RM377.3 billion in 1Q2024, having expanded by 7.6% y-o-y to RM375.3 billion in 2023, primarily driven by growth in its key residential mortgage lending portfolio (+10.0% y-o-y), in line with the bank’s focus on growth in its consumer segment. Of CIMB Bank’s loan portfolio, Malaysia accounted for 71.1%, Singapore 11.7% and Thailand 9.5% in 2023.

For 1Q2024, pre-tax profit improved to RM1.9 billion (1Q2023: RM1.7 billion) supported by higher net interest income (+10.0% y-o-y to RM2.9 billion) and stronger realised/unrealised securities trading performance. In 2023, pre-tax profit grew 9.6% to RM7.0 billion, supported by higher non-interest income and lower impairment charges which more than offset the 5.6% decline in net interest income caused by stiff deposit competition, hence costlier funding. As a result, net interest margin (NIM) contracted 28 bps to 1.87% in 2023. MARC Ratings, nevertheless, anticipates NIM to stay steady in 2024 as competition for deposits eases. 

Consolidated gross impaired loans (GIL) ratio declined to 1.94% of gross loans in 2023 (end-2022: 2.34%). The rating agency notes that the higher write-offs was a key factor in the decline, supported by lower new impaired loans and improved recoveries. Despite a declining trend in the GIL ratio during 2022-2023, asset quality pressures would remain given the bank’s high retail portfolio growth over the past few years (above the domestic banking industry average) that would be accompanied by portfolio seasoning. 

MARC Ratings views CIMB Bank’s capitalisation, with Common Equity Tier 1 (CET1), Tier 1 and total capital ratios of 14.8%, 15.2% and 18.8% as at end-2023, as largely in line with its peers and would remain supportive of loan growth. Liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) met the minimum requirements at 136.4% and 103.5%. 

The stable outlook reflects MARC Ratings’ expectation that CIMB Bank’s overall profile will be broadly maintained in the next 12-18 months.

The ratings could come under pressure if there is a decline in the bank’s systemic importance in the domestic banking system and/or if there is a sharp deterioration in the group’s asset quality and loss absorption capacity.