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CIMB Quarterly Net Declines for First Time in Four Years

CIMB Group Holdings Bhd., Malaysia’s second-largest bank by assets, reported its first drop in quarterly profit in four years in the absence of one-time gains.

Net income declined 4.5 percent to 1.08 billion ringgit ($349 million), or 14.6 sen per share, in the three months ended Dec. 31 from 1.13 billion ringgit, or 15.2 sen per share, a year earlier, according to a stock exchange filing in Kuala Lumpur yesterday. The lender declared a higher dividend of 18.38 sen a share compared with 10 sen a year ago.

While CIMB’s core banking operations continued to grow, the lender booked an exceptional gain in 2011 on the revaluation of its insurance joint venture with Aviva Plc. Growth in Malaysia’s $288 billion economy has exceeded 5 percent for six straight quarters through December on domestic demand and increased investment, spurring credit demand.

“Asean economies remain robust although there are downside risks from political events and inflationary pressures,” Chief Executive Officer Nazir Razak told reporters in Kuala Lumpur yesterday, referring to the 10-member Association of Southeast Asian Nations. “Although still quite fragile, the global operating environment is showing signs of improvement which is key to sustaining growth in Asia.”

The last time CIMB’s quarterly profit declined from a year earlier was in the three months ended December 2008, according to data compiled by Bloomberg.

Election Concern

CIMB, which has interests throughout most of Southeast Asia, has slumped 7.3 percent this year in Kuala Lumpur trading, underperforming a 3.7 percent decline in the benchmark FTSE Bursa Malaysia KLCI Index. Shares have retreated in the region’s third-largest economy after hitting a record high on Jan. 7 on concern that the governing National Front coalition may lose seats in parliament in an impending general election.

Prime Minister Najib Razak is Nazir’s older brother. CIMB was unchanged at 7.07 ringgit at 10:57 a.m. in Kuala Lumpur trading today.

“We do not expect significant re-rating in the share price on the back of the result as investors are focused on the coming election,” Citigroup Inc. analysts led by Fiona Leong wrote in an e-mailed report today. Citigroup maintained its “sell” rating with a target price of 7.15 ringgit.

CIMB remains interested in seeking dual stock listings for the group in Thailand and Indonesia where it already has subsidiaries listed, Nazir said.

Share Sales

“The idea of a multiple listing for CIMB Group is something we are very keen on, but they are very dependent on regulations in Thailand and also Indonesia,” he said. “So we’ll wait for the regulators to make final decisions.”

CIMB was the top arranger of Malaysia equity and rights offerings for a fourth year in 2012, helping manage the country’s three biggest initial public offerings including Astro Malaysia Holdings Bhd.’s $1.5 billion share sale in October.

Net non-interest income, including IPO fees, advanced 5.5 percent to 1.06 billion ringgit in the fourth quarter, CIMB said. Net interest income, or revenue from borrowers after deducting interest paid to depositors, rose 8.4 percent to 1.91 billion ringgit in the quarter.

Allowances for impairment losses on loans and financing shrank 82 percent to 52.3 million ringgit, the company said.

Full-year profit rose 7.8 percent to a record 4.34 billion ringgit, matching a mean estimate of 4.3 billion ringgit by 28 analysts, according to data compiled by Bloomberg.

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