MARC Ratings has affirmed its financial institution (FI) ratings on CIMB Bank Berhad at AAA/MARC-1. Concurrently, the rating agency has also affirmed its rating of AA+ on the bank’s existing RM10.0 billion Basel III-compliant Tier 2 Subordinated Debt programme. 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 deposits are key rating drivers. It is the core banking subsidiary of CIMB Group, designated a domestic systemically important bank by Bank Negara Malaysia. CIMB Bank’s instrument rating reflects the relative loss severity risk profiles of the subordinated debt. The bank has over 200 branches across Malaysia and accounted for a sizeable 17.6% of total loans and 23.5% of core deposits of the domestic banking industry as at end-1H2023.

Multiple rate hikes, a larger loan base and lower impairment charges were key drivers of CIMB Bank’s improved pre-tax profit to RM6.4 billion in 2022, almost double the level of the previous corresponding year. This led to a wider net interest margin of 2.15% in 2022. Earnings momentum continued into 1H2023, with pre-tax profit improving further to RM3.5 billion, up 5.9% y-o-y (1H2022: RM3.3 billion). This was mainly due to higher non-interest operating income of RM2.0 billion (1H2022: RM1.4 billion) which came from unrealised gains on revaluation of securities and gains from disposal of loans.

CIMB Bank’s loan book grew by 7.5% y-o-y to RM361.1 billion in 1H2023, largely on the back of growing mortgage lending (+9.6% y-o-y to RM126.8 billion). CIMB Bank is more geographically diversified than most of its peers; overseas loan book comprised 28.6% of the bank’s loan book at end-1H2023.

Consolidated gross impaired loans ratio stood at 2.55% as at end-1H2023 (industry average: 1.76%). The rating agency understands that the bank could look to more write-offs and sale of impaired loans in the near term to manage its asset quality. CIMB Bank’s capitalisation levels remained adequate, with Common Equity Tier 1, Tier 1 and total capital ratios of 14.4%, 15.0% and 18.4% as at end-1H2023, largely in line with its peers. At the entity level, the bank’s liquidity coverage ratio and net stable funding ratio stood at 126.8% and 109.3% as at end-2022, well above the regulatory minimum requirements.