CIMB hit by lower trading income in Q1 as growth remains muted

Risk aversion brought about by the general elections may impact its investment banking business.

CIMB reported lower than expected earnings in Q1 as net profit rose to $326.06m (RM1.3b) even with a one-off gain worth $38.42m (RM153.2m) from the stake disposal of CIMB Securities International, according to UOB Kay Hian. 

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Trading income crashed 25.2% YoY amidst marked-to-market losses and forex translation impact on net interest income from its overseas operations. Overall non-interest income dropped 7.9% YoY in Q1.

Although net interest margin (NIM), a key indicator of profitability, improved by 4bp QoQ thanks to the recent OPR hike, excess domestic liquidity and competition for higher quality loans could still put pressure on the NIMs in the near term.

“The heightened capital market volatility and risk aversion post GE14 coupled with external developments could partially impact the execution of its investment banking pipeline, prompting us to tone down our fee income growth forecast for 2018/19 to 6%/7% respectively (previously: 9%/10% respectively (2017: +11%),” said analyst Keith Wee Teck Keong.

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Malaysian banks are set for a slower loan growth in 2018 from 14.3% in 2017 to single-digits at 9.7% in 2018 as economic uncertainty brought about by the change in leadership under Mahathir Mohamad may dampen banking sector growth.