MARC 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 whose key subsidiary CIMB Bank Berhad accounted for 86.0% of its total consolidated assets of RM608.6 billion as at end-1Q2021 and historically contributed to a substantial portion of the group’s dividend income. CIMB Bank has a AAA/Stable rating from MARC based on the bank’s systemic importance given its significant market position in loans and deposits in the domestic banking industry. CIMB Bank is a key part of the group that has been accorded domestic systemically important bank (D-SIB) status since 2020. CIMB Group’s long-term rating of AA+ reflects its subordination to CIMB Bank.
For 1Q2021, CIMB Group recorded pre-tax profit of RM2.9 billion, significantly higher than RM0.7 billion in the previous corresponding period, which was mainly due to higher impairment charges as part of a raft of pre-emptive measures during the onset of the pandemic. Overall loan growth remains anaemic, growing by 0.7% y-o-y to RM366.6 billion as at end-1Q2021. Of its key operating markets, CIMB Group’s domestic loans accounted for 62.5% of its loan book, with Indonesia at 14.6%, Thailand at 8.9% and Singapore at 8.3%. Gross impaired loans (GIL) ratio stood at 3.44% as at end-1Q2021; its higher GIL ratios in Singapore (4.83%), Indonesia (8.09%) and Thailand (5.31%) have contributed to the need to reshape its regional portfolios in the near term. CIMB Group’s capital position remains solid with its Common Equity Tier 1 and total capital ratios standing at 12.1% and 16.2% as at end-1Q2021.
For 2020, CIMB Group received dividend income of RM1.8 billion that was more than sufficient to meet its debt obligations. Its debt-to equity ratio was stable at 0.57x, although borrowings have been on a rising trend since 2016, largely due to Basel III–compliant sub-debt issuances. Given 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.