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

The affirmation reflects the bank’s high systemic importance as the second-largest bank by assets in Malaysia. It is the core banking subsidiary of CIMB Group, designated a domestic systemically important bank by Bank Negara Malaysia. CIMB Bank maintains a strong franchise, with over 200 branches across Malaysia, and a sizeable 17.5% and 23.3% market share in loans and core deposits as at end-1Q2024.

CIMB Bank reported pre-tax profit of RM7.0 billion in 2023 (+9.6% y-o-y), supported by higher non-interest income from investments and lower impairment charges, which more than offset the decline in net interest income. Despite a loan book growth of 7.6% in 2023, net interest income was affected by costlier funding due to strong competition for deposits last year. Strong earnings momentum continued into 1Q2024, with pre-tax profit improving to RM1.9 billion, up 11.8% y-o-y. CIMB Bank’s net interest margin (NIM) was broader in 1Q2024 at 1.95% (2023: 1.87%). MARC Ratings anticipates NIM to stay broadly steady amid less intense deposit competition.

CIMB Bank’s consolidated gross impaired loans ratio declined further to 1.88% as at end-1Q2024 (2023: 1.94%; 2022: 2.34%), although it remains slightly higher than the industry average of 1.62%. The rating agency notes that the reduced impaired loans ratio over the period was partly due to write-offs and sales of impaired loans. In terms of capitalisation, the bank’s Common Equity Tier 1, Tier 1 and total capital ratios remained healthy at 14.8%, 15.2% and 18.8% as at end-2023, largely in line with its peers. Its liquidity coverage ratio and net stable funding ratio met the minimum requirements, standing at 136.4% and 103.5%.