Group CEO Abdul Rahman Ahmad said the better performance was underpinned by robust operating income growth with solid loan and current account savings account (CASA) expansion from all core markets, coupled with lower provisions from prudent risk management and recoveries.

Operating income rose 5.9% year-on-year (y-o-y) to RM21.01 billion from RM19.84 billion previously, driven by non-interest income which grew strongly by 36.5% to RM6.39 billion from investment and market-related income.

“This offset the challenging net income margin (NIM) environment caused by the continued elevated cost of deposits with net interest income dipping 3.5% to RM14.63 billion,” he said at CIMB’s FY2023 results press conference today.

Abdul Rahman also announced that CIMB Group has proposed an all-cash second interim dividend of 18.5 sen per share, bringing the total proposed annual dividend to 36 sen per share for a payout ratio of 55%, in line with the group’s dividend policy.

In addition, the group is also proposing a special dividend payout of RM747 million or seven sen per share, which translates to a record total dividend payout of RM4.59 billion for FY2023, he said.

CIMB Group saw total gross loans increase by 8.3% to RM440.9 billion while total deposits grew by 8.1% to RM497.7 billion and total CASA expanded to 11.5% y-o-y, underpinned by key countries and segments.

The bank said it expects its total loan growth for FY2024 to be in the range of 5% to 7%, in line with market performance.

“I think in terms of our loan growth target, we are not constrained by demand as demand continues to be positive in terms of economic recovery and growth, and demand for loans continues to be strong.

“I think the constraint for all banks, not just us, is really about the deposit side, whether we have the ability to grow deposits more to manage what we call the NIM compression, which is happening in the industry environment,” he said.

Abdul Rahman stressed that CIMB Group has set up an achievable loan growth target by raising its deposit to a level that would not put pressure on NIM.

He noted that the cost-to-income ratio was marginally higher y-o-y at 46.9%, with FY2023 operating expenses rising by 6.9% y-o-y from cost inflation and technology investments.

“This led to the bank’s pre-provisioning operating profit growing 5.1% to RM11.15 billion.

“Total provisions declined significantly by 26.4% y-o-y, attributed to the moderated credit environment and sustained improvement in asset quality from portfolio reshaping,” he said.

According to him, CIMB Group continues to be well capitalised as its Common Equity Tier 1 (CET1) ratio remained strong at 14.5% as at December 2023, with its total capital ratio standing at 18.2%.

On NIM compression, CIMB Group recorded a nine-basis points NIM compression mainly driven by two markets, Malaysia and Indonesia.

“In Singapore, we expanded our margins on a yearly basis because of the flush liquidity.

“In Malaysia, the NIM compression was mainly due to the very intensified deposit competition that we saw especially in the first half of 2023. We did take some action in terms of moderating that deposit pricing pressure towards the second half of 2023,” he said.

For FY2024, CIMB Group said it is expecting the NIM margin to be stable and expand around five basis points, mainly driven by Malaysia’s market.

Moving forward, the group noted that it will remain vigilant of the global economic uncertainties due to geopolitical tensions and concerns of a slowdown in China, together with continued industry competition for deposits.

“Our priority remains on completing our Forward23+ strategic plan and delivering on key focus areas, such as strong Preferred Banking and wealth management, strengthening our CASA and deposit franchise, and balance sheet management to improve NIM regionally.

“Accordingly, we are confident in continuing the momentum of positive financial performance where we are currently on track to meet our FY2024 targets across most profitability metrics,” he said.

At the close of trading, CIMB’s share price was up by 3 sen or 0.47% at RM6.46, giving it a market capitalisation of RM68.9 billion.