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.

CIMB Group is Malaysia’s second-largest banking group with total assets of RM720.3 billion as at end-1H2023. As a non-operating financial holding company, CIMB Group relies on dividends from its banking subsidiaries, chief of which is CIMB Bank Berhad. The latter accounted for 85.0% of the group’s total consolidated assets as at end-1H2023 and contributed around 77% on average to total dividend income over the past five years. CIMB Group’s long-term rating of AA+ reflects the subordination of the holding company’s financial obligations to CIMB Bank, which carries a AAA/Stable rating from MARC Ratings. CIMB Group is deemed a domestic systemically important bank, hinging on the systemic risk posed by CIMB Bank due to the bank’s significant market position in loans and deposits in the domestic banking industry.

In 1H2023, CIMB Group recorded consolidated pre-tax profit of RM4.7 billion, up 13.6% y-o-y from RM4.2 billion in the previous corresponding period. Gross impaired loans ratio as at end-1H2023 stood at 3.35% (2022: 3.27%) partly due to the wind down of relief measures. This notwithstanding, MARC Ratings does not expect any major spike in credit impairments arising from loans post-relief measures expiry. CIMB Group’s capital ratios, namely Common Equity Tier 1, Tier 1 and total capital ratios of 14.1%, 14.9% and 17.7% as at end-1H2023 are sufficiently above the regulatory minimum requirements.

CIMB Group received dividends totalling RM3.1 billion in 2022, which would be sufficient to meet its debt obligations. Its debt-to equity ratio improved to 0.48x as at end-2022 despite slightly higher borrowings of RM14.6 billion (end-2021: 0.52x, RM14.3 billion), as shareholders’ funds surged to RM30.4 billion from RM27.5 billion over the same period, boosted by larger retained earnings and issuance of new shares through its dividend reinvestment scheme. Borrowings largely comprise the Basel III-compliant sub-debt issuances, which were utilised to invest in similar capital instruments issued by its banking subsidiaries. The sub-debt issued by CIMB Group is, therefore, backed by the cash flows generated by its banking subsidiaries, thus mitigating liquidity risks.