MARC Ratings has affirmed its long- and short-term corporate credit ratings of AA+/MARC-1 on CIMB Group Holdings Berhad (CIMB Group). The rating agency has concurrently affirmed its AA rating 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 RM757.9 billion as at end-1Q2024. A non-operating financial holding company, CIMB Group relies on dividends from its banking subsidiaries, primarily CIMB Bank Berhad. Over the past five years, dividends from CIMB Bank accounted for approximately 77% of CIMB Group’s total dividend income on average. 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 a Bank Negara Malaysia-designated domestic systemically important bank, hinging on the systemic risk posed by CIMB Bank. The latter’s systemic importance is underpinned by its large market share of about 17.5% of system loans and 23.3% of core deposits as at end-1Q2024.

CIMB Group reported a 14.0% y-o-y growth in consolidated pre-tax profit to RM9.5 billion in 2023, driven by higher non-interest income and lower provisioning costs that offset the impact of a lower net interest margin (NIM). Intensified competition for deposits had led to a decline in NIM to 2.25% in 2023, down from 2.54% the year prior. CIMB Group’s loan book grew by 8.3% y-o-y in 2023 to RM440.9 billion, backed by growth across all key markets, including Malaysia (+5.4% y-o-y), Singapore (+19.0% y-o-y), Indonesia (+12.2% y-o-y) and Thailand (+9.0% y-o-y). Loan growth is forecast to range between 5% and 7% in 2024.

Gross impaired loans have declined as a share of total loans in recent years to a moderate 2.55% as at end-1Q2024. This is partly helped by write-offs and sales of problematic loans. MARC Ratings views CIMB Group’s capitalisation as healthy, with Common Equity Tier 1, Tier 1 and total capital ratios of 14.5%, 15.2% and 18.2% as at end-1Q2024. The healthy capital buffers and adequate loan-loss coverage – between 90% and 100% – provide a cushion against potential credit loss and support the group’s loan growth.

In 2023, CIMB Group received dividends of RM3.3 billion, sufficient to meet its debt obligations. Its debt-to-equity ratio remained unchanged at 0.48x as at end-2023. Borrowings comprise Basel III-compliant sub-debt issuances, which were utilised to invest 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. Liquidity coverage ratios and net stable funding ratios of its key subsidiaries stood well above the regulatory requirements.