Rating action              

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. The rating differential between CIMB Group’s long-term corporate credit rating and its subordinated debt programme rating reflects the subordination of the latter to the senior obligations of CIMB Group in accordance with MARC Ratings’ methodology.

CIMB Group is a non-operating financial holding company, relying on dividends from its banking subsidiaries, chief of which is CIMB Bank Berhad, to meet its financial obligations. CIMB Bank accounted for 86.2% of the group’s total assets of RM757.9 billion as at end-1Q2024, and contributed for approximately 77% of total dividend income on average between 2019 and 2023. CIMB Group’s long-term rating of AA+ reflects the subordination of the holding company’s financial obligations to CIMB Bank (AAA/Stable). By asset size, CIMB Group is the second-largest domestic banking group and is designated as a domestic systemically important bank (D-SIB) by Bank Negara Malaysia (BNM).

Apart from CIMB Bank, the CIMB Group comprises CIMB Investment Bank Berhad, Indonesia-based PT Bank CIMB Niaga Tbk, CIMB Islamic Bank Berhad and CIMB Thai Bank Public Company Limited; the latter two are held through CIMB Bank. Consolidated pre-tax profit rose 14.0% y-o-y to RM9.5 billion in 2023 on higher non-interest income and lower impairment charges, which offset the compression in the net interest margin (NIM) to 2.25% from 2.54% in the previous year. Loan book expanded by 8.3% y-o-y to RM440.9 billion in 2023, with all key markets recording growth (Malaysia: +5.4%; Singapore: +19.0%; Indonesia: +12.2% and Thailand: +9.0%). For 2024, loan book is forecast to range between 5% and 7%.

Gross impaired loans (GIL) decreased to RM11.7 billion as at end-2023 (2022: RM13.3 billion) largely due to write-offs, sales of problem loans and lower new impairments. Correspondingly, CIMB Group’s GIL ratio declined to 2.67% as at end-2023 (2022: 3.27%). Total loans under relief measures accounted for about 1% of the group’s loan book, largely related to commercial lending in Indonesia. 

MARC Ratings views CIMB Group’s capitalisation as healthy, with Common Equity Tier 1 (CET1), Tier 1 and total capital ratios of 14.5%, 15.2% and 18.2% as at end-1Q2024. This, together with adequate loan-loss coverage of between 90% and 100%, provides a cushion against potential credit loss and supports the group’s loan growth. Given the adequate capitalisation, there was no requirement for a dividend reinvestment scheme (DRS) in 2023. 

CIMB Group maintained stable funding and liquidity profiles, with its loans-to-funds ratio remaining steady at 83.1% as at end-2023 (2022: 83.5%), and its current and savings account (CASA) deposits moderately increasing to 42.9% of total deposits as at end-2023 from 41.3% as at end-2022. 

In 2023, CIMB Group received dividends of RM3.3 billion, sufficient to meet its debt obligations. Its debt-to-equity (DE) ratio remained unchanged at 0.48x as at end-2023. Borrowings comprised Basel III-compliant sub-debt issuances, which were utilised to invest 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. The rating agency views CIMB Group’s liquidity as adequate; liquidity coverage ratios (LCR) and net stable funding ratios (NSFR) of its key banking subsidiaries stood well above regulatory requirements. 

  

The stable outlook reflects MARC Ratings’ expectation that CIMB Group will maintain its high systemic importance status in the domestic banking system and that the Group’s financial and credit metrics will remain broadly stable over the next 12-18 months. 

The rating could come under pressure if there is any change in the rating of its core entity, CIMB Bank, which would impact the group’s ratings and its subordinated instruments.