CIMB Thai Bank will not speed up its loan expansion from next year onward as it believes its asset size of Bt300 billion is a suitable scale for running its business in Thailand, president and chief executive officer Subhak Siwaraksa said last week.
For the past five years, CIMB Thai Bank has accelerated its loan growth, especially in retail banking, to comply with Malaysia-based CIMB Group‘s policy.
This has been achieved via housing loans in the retail , or individual , segment in order to build up thebank‘s customer base, he said.
The strategy has resulted in a housing-loan portfolio of Bt50 billion to Bt60 billion, against less than Bt10 billion five years ago, giving CIMB Thai Bank a total retail-banking portfolio of nearly Bt100 billion.
During this period, the bank targeted overall annual loan growth of above 20 per cent, but this was only achieved in 2013, when lending expanded by 23.2 per cent.
Last year’s loan growth came in at 11 per cent, with growth of just 4.7 per cent being achieved in the first nine months of this year, against a target of 15-20 per cent, said the CEO.
In terms of asset size, CIMB Thai Bank‘s Bt300 billion gives it a ranking of eighth out of the 11 listed banks in Thailand.
“Singapore-based United Overseas Bank (Thai) has an asset size of Bt350 billion, and they are okay with this size, as well. With the current scale of CIMB Thai Bank, we should not be aggressive and we should keep to [loan] growth of 10 per cent per year,” Subhak said
“We discussed this with the group in Malaysia and they agreed with our way. The economic slowdown of the past two years [in Thailand] has impacted on retail lending, causing the bank to spend much more time than expected on expanding business to retail clients and resulting in our return on equity being lower than the target of 5 to 6 per cent,” he said.
CIMB Thai Bank reported a return on equity of 9.58 per cent for 2012, followed by 7.18 per cent for 2013 and 4.44 per cent for last year, while net profit came in at Bt1.58 billion, Bt1.49 billion and Bt988.8 million, respectively.
For the first nine months of this year, the bank posted net earnings of Bt847 million, down 6 per cent from Bt900 million in the same period last year.
Subhak said he expected full-year net profit to be similar to or a little higher than last year’s level, because even though it had posted the highest third-quarter percentage growth among its peers, the sum needed to be put aside as additional provisioning, especially during the current economic environment.
CIMB Thai Bank recorded a year-on-year rise of 81 per cent in third-quarter net profit to Bt498 million.
However, the Thai unit of CIMB Group hopes to achieve a return on equity of 10-12 per cent in the next three years, by focusing on non-interest income from areas such as investment banking, treasury products, bancassurance and mutual funds, Subhak said.
While non-interest income at present contributes 30-35 per cent of the bank‘s income, it will not overtake interest income as the main contributor despite the planned shift to a lower gear for loan growth in the coming years, he said.
In the next two to three years, non-interest income should reach 40 per cent, he added.
CIMB Group is strongly committed to its investment in Thailand, as reflected in its approval of the localbank‘s capital increase of Bt3.68 billion via the issuance of new shares, he stressed.
CIMB Thai Bank will increase its registered capital from Bt10.54 billion to Bt13.7 billion by issuing 6.325 billion new shares.
The subscription period is October 26-30 and, after the additional funds are mobilised, its capital-adequacy ratio will rise to 15 per cent, from the current 13.7 per cent.
CIMB Group is happy with the bank‘s performance because of the quarterly profit contribution of 8-10 per cent that it makes to the group, he said.
Furthermore, the Thai unit has a substantial role in strengthening cross-border deals for the Malaysian banking group.
The bank is one of four institutions mandated as lead arrangers for a syndicated term loan of US$1.25 billion (Bt44.25 billion) to Charoen Pokphand Group, with CIMB Labuan , part of CIMB Group‘s Malaysian operations , lending $250 million as part of the deal.
CIMB Thai Bank, meanwhile, is the onshore security agent for a $400-million loan to Maxtop Management Corp, a TCC Group company.
CIMB Labuan is the lender and arranger and offshore security agent, while CIMB SG , CIMB Group‘s Singaporean arm , provides the bank account for the deal.