CIMB GROUP HOLDINGS BERHAD

Business Summary
CIMB Group Holdings Bhd is Malaysia’s second-biggest bank in terms of market cap, operating in 16 countries in the ASEAN region and worldwide.  

Dividends (3/5): ⭐ ⭐ ⭐ 

Value (3/5): ⭐ ⭐ ⭐

Financials (4/5): ⭐ ⭐ ⭐ ⭐ 

Growth (4/5): ⭐ ⭐ ⭐ ⭐ 

Business (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Reference: (i) MyKayaPlus Metrics Definition (ii) MyKayaPlus Metric Evaluation Scale

2018 Geographical Statistics

Countries & RegionOperating RevenueProfit Before Tax
Malaysia60%64%
Singapore9%7%
Indonesia17%20%
Others14%9%

Being one of the biggest banks in South East Asia, CIMB Group Holdings Bhd derives a majority of its revenue and profits from its home base Malaysia. It also has a strong presence in Singapore, Thailand and Indonesia. 

Financial Performance

CIMB Group Holdings Bhd has recorded steady improving operating revenues every year. Profits are also on a long uptrend move. CIMB Group Holdings Bhd is Malaysia’s 2nd largest bank, hence it enjoys a certain scale by having its presence in big cities and even small towns.

Return on Equity dipped suddenly in the year 2013 from double digits of 15% down to 6.32% but is slowly to trend back up. From 2013 to 2015, the Basel Committee on Banking Supervision passed a set of financial regulations known as Basel III, intended to strengthen a bank’s capital requirement by increasing liquidity and decreasing leverage.

How CIMB Group Holdings Bhd actually strengthens its capital is by issuing Dividend Reinvestment Plans (DRP) to its shareholders. CIMB Group Holdings Bhd provides an option for shareholders to purchase additional shares at a big discount via their semi-annual dividend payout scheme. This way, shareholders will be rewarded by a lower weighted average cost of CIMB shares, the bank gets to keep the cash generated from their business to buff up their capital adequacy.

It’s a win-win situation for both the bank and the investor! As of 2018, DRS was continued with a reinvestment rate averaging 83.7%, reflecting investor confidence in the Group and generating an additional RM1.9 billion of capital.

2018 Operating Revenue Breakdown

CIMB Group Holdings Bhd relies heavily on interest income for its operating revenue. Interest income contributes close to 71% of its operating revenue. The rest of the RM 7.7 billion is contributed by income from its Islamic banking operations and non-interest income, which includes investment income, brokerage fees, commissions.

Being the nearest competitor to Malayan Banking Bhd, it’s interest income business is comparable and shows promising growth. However, there are also threats faced by the traditional banking sector as smaller fin-tech and personal borrowing companies are on the rise.

Also, to further cushion the rate of a squeezed Net Interest Margin, it would be prudent for CIMB Group Holdings Bhd to further look into potential sectors that are not affected by the change of interest rates policy. 

Balance Sheet

YearAssets (RM’000)Liabilities (RM’000)Equities (RM’000)
2018534,089,043481,501,07252,587,971
2017506,499,532456,693,09749,806,435
2016485,766,887438,687,72947,079,158
2015461,577,143419,344,51542,232,628
2014414,156,356375,765,23338,391,123

2018 Capital Adequacy Ratio

Tier 1 Capital Ratio13.7%
Total Capital Ratio18.4%

In the year 2018, CIMB Group Holdings Bhd has Assets of RM534 billion, liabilities of RM482 billion and Equities of RM53 million. Total Capital Ratio is at 18.4%, much more than the safety limit set by Bank Negara Malaysia.

Operating Cash Flow & Dividends Paid Out

Source: CIMB GROUP HOLDINGS BHD ANNUAL REPORT

Operating cash flow (before changes in operating assets and liabilities) increased in tandem with CIMB’s recorded revenue and profits. Dividends paid out in cash, however, are choppy.

Remember about the Dividend Reinvestment Plan we mentioned earlier? So instead of CIMB Group Holdings Bhd paying out cash to shareholders, they will issue and sell more shares to existing shareholders at a discounted price. Shareholders can take the opportunity to buy more shares at a more attractive price.

So how should we rate the dividend performance of CIMB? By just based on the historical announced dividends per share, CIMB Holdings Bhd actually shows a stable dividend payout, ranging from RM0.14 per share to RM0.25 per share. 

Price

MyKayaPlus Verdict

CIMB Group Holdings Bhd’s share price has been coming down as of lately. Share price movements are always influenced by a lot of factors. The latest price fluctuations are heavily caused by uncertain macroeconomic events happening (The US & China Trade War and also slowed down global growth). 

Nevertheless, CIMB Group Holding Bhd’s results have been stable and on an uptick trend. Of course, the recent OPR rate cuts will no doubt impact its Net Interest Margin. 

You may ask, is it worth it to swap cash dividend with more shares, since it deficit the purpose of dividends investing? 

At MyKayaplus, we see great dividend companies as companies that can further grow if given enough time. And when the business grows, so will the profit and the eventual dividend payout in the future. 

Time will tell whether CIMB Group Holdings Bhd will be able to flourish and grow more in the future. But judging from past and current results, we think this bank is in the right direction!

What are your favourite banks for dividend investing? Let us know in the comment below!

You might also wanna check out our Malayan Banking Berhad analysis here.

DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
No warranty is made with respect to the accuracy, adequacy, reliability, suitability, applicability, or completeness of the information contained. The author disclaims any reward or responsibility for any gains or losses arising from direct and indirect use & application of any contents of the article/report/written material

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