CIMB Net Jumps 37% to Record, Boosted by Stake Sale

CIMB (CIMB) Group Holdings Bhd., Malaysia’s second-largest bank by assets, reported a 37 percent jump in first-quarter profit that was boosted by the sale of its stake in an insurance joint venture.

Net income surged to a record 1.39 billion ringgit ($460 million), or 18.65 sen per share, in the three months ended March 31 from 1.01 billion ringgit, or 13.6 sen per share, a year earlier, according to a stock exchange filing in Kuala Lumpur yesterday.

CIMB announced in January it will sell most of its stake in Malaysian insurer CIMB-Aviva, a venture with London-based Aviva Plc, to Sun Life Financial Inc. and Khazanah Nasional Bhd. It booked one-time gains of 515.1 million ringgit for the quarter, according to yesterday’s filing. Earnings would have grown 4.2 percent if exceptional items were excluded, Nazir Razak, the bank’s chief executive officer, said in a separate statement.

“We had a decent start to the year with steady growth across most business segments,” Nazir said. “We also took this opportunity to take some restructuring charges that will bring about longer term cost benefits.”

The shares jumped 1.5 percent as of 9:40 a.m. in Kuala Lumpur trading today, poised for its highest close since May 7. Kuala Lumpur-based CIMB has surged 13 percent since Prime Minister Najib Razak, older brother of Nazir, was returned to power in a tightly-fought election on May 5. It’s outperformed a 5.7 percent jump in the benchmark FTSE Bursa Malaysia KLCI Index over the same period.

Transformation Plan

The victory gave Najib the mandate to continue an economic transformation program aimed at drawing $444 billion of investment this decade from private sector-led projects including mass railway and oil storage.

“The group’s strong domestic corporate presence means CIMB would be one of the major beneficiaries from the rollout of the economic transformation program projects,” David Chong, an analyst at RHB Capital Bhd., wrote in a report today. “Despite the recent run-up in share price, valuations are still at a discount to large-cap peers.”

RHB raised CIMB’s price target to 10.90 ringgit from 9.90 ringgit and kept its buy rating on the stock.

Net interest income, or revenue from borrowers after deducting interest paid to depositors, rose 9.1 percent to 1.9 billion ringgit in the period. Allowances for impairment losses on loans and financing shrank 44 percent to 80.7 million ringgit, the company said.

Advisory Fees

Net non-interest income, including deal advisory fees, climbed 1.2 percent to 1.16 billion ringgit in the first quarter, CIMB said. Credit demand was supported by infrastructure projects and domestic spending as Southeast Asia’s third-largest economy grew 4.1 percent last quarter.

CIMB agreed last year to buy a 60 percent stake in the Philippines’ Bank of Commerce to expand its Southeast Asia footprint. Nazir told reporters last week that it was proceeding with discussions even after seller San Miguel Corp. signaled the deal may be scrapped.

Issues will be resolved in about a week, San Miguel President Ramon Ang told reporters yesterday, adding that the brewer was willing to keep the bank if talks falter. “Many” other groups are interested, he said.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editors responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net; Chitra Somayaji in Hong Kong at csomayaji@bloomberg.net

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