What is Growth Strategy and Future Prospects of CIMB Group Holdings Company?

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What is the Growth Strategy and Future Prospects of CIMB Group Holdings?

CIMB Group Holdings Berhad recently launched its Forward30 strategic plan in March 2025, a six-year roadmap to accelerate growth. This follows the successful Forward23+ strategy, which boosted its return on equity (ROE) from 2.1% in 2020 to 11.2% in 2024.

The Group's impressive annualized total shareholders return of 34.6% from 2020 to 2024 highlights the effectiveness of its strategic initiatives in a competitive banking landscape.

CIMB Group, with roots dating back to 1924, has evolved through strategic mergers into a leading ASEAN universal bank. It operates in 10 countries, boasting 1,080 branches across the region and serving a diverse clientele. Understanding its strategic direction is key to evaluating its future potential, which can be further analyzed through tools like the CIMB Group Holdings BCG Matrix.

CIMB Group's growth strategy is centered on its Forward30 plan, aiming for strategic and purposeful expansion across the ASEAN region. This plan leverages the group's established network to optimize capital and resources, focusing on both new market entry and deepening its presence in existing high-growth economies.

ASEAN Network Optimization

CIMB Group's Forward30 plan emphasizes leveraging its strong ASEAN network to optimize capital and resources for strategic growth.

Singapore Market Focus

The group anticipates significant growth in Singapore, recognizing its importance as a wealth and treasury hub. Singapore contributed 14% to the banking group's profit before tax in Q1 2025, up from 11% the previous year.

Niche Market Strategy in Singapore

In Singapore, CIMB operates as a challenger bank, focusing on specific segments like remittances for Malaysians and expanding bancassurance partnerships. Transaction volumes between Singapore dollars and Malaysian ringgit have seen a sixfold increase.

Support for Economic Zones

CIMB is actively supporting firms, particularly data center players, expanding in the Johor-Singapore Special Economic Zone (JS-SEZ) with banking and advisory solutions.

Product and service expansion is a core component of CIMB's growth strategy, with a particular focus on supporting businesses in high-growth sectors and regions. The group is targeting a loan growth of between 5.0% and 7.0% for 2025, with Indonesia and Malaysia expected to be key drivers. This represents an improvement from the 4.8% year-on-year loan growth recorded in 2024. The Forward30 plan is structured around four strategic growth levers: Capital, Cash, Cross-sell, and Capabilities. Under the 'Cash' lever, CIMB aims to enhance its deposit franchise to reduce the cost of funds by 10 to 20 basis points by 2030. The 'Cross-sell' lever is designed to unlock value through an integrated 'one-bank' approach, offering clients comprehensive financial solutions to generate new income streams, aligning with its broader Marketing Strategy of CIMB Group Holdings.

Key Growth Drivers and Targets

CIMB's expansion initiatives are supported by specific financial targets and strategic levers designed to drive sustainable growth across its operations.

• Targeting loan growth of 5.0% to 7.0% in 2025.
• Indonesia and Malaysia are key markets for lending activities.
• Aiming to reduce cost of funds by 10 to 20 basis points by 2030 through deposit franchise enhancement.
• Focus on cross-selling integrated financial solutions to clients.

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CIMB Group is actively pursuing a robust innovation and technology strategy to drive its future growth and enhance customer experience. This approach is central to its Forward30 strategic plan, launched in March 2025, which acknowledges and addresses past limitations in digital infrastructure. The bank's commitment to technological advancement is evident in its significant investments and strategic focus on digital and AI-led initiatives.

Digital and AI Focus

CIMB Group is prioritizing digital and AI-led initiatives as a core component of its Forward30 strategic plan. This focus aims to drive sustained growth and improve operational efficiency.

Technology Investment

In 2024, CIMB allocated over USD 181.41 million (RM800 million) to technology upgrades. Technology investments saw a 5% year-on-year increase in Q1 2025.

Emerging Technologies

The bank is investing in key emerging technologies, including AI, big data, cloud computing, and advanced payment systems. This is to enhance its service offerings and operational capabilities.

Data-First Organization

CIMB aims to transform its operations by becoming a data-first organization. This involves deploying advanced data analytics and AI tools to drive informed decision-making.

Infrastructure Modernization

A key aspect of the strategy is a 'resiliency transformation' to fix backend infrastructure. This is being done concurrently with modernizing front-end platforms for improved user experience.

Digital Banking Platforms

Fully digital banks in the Philippines and Vietnam serve as efficient platforms for connecting with new customer segments. These operations exemplify CIMB's commitment to digital banking expansion in ASEAN.

Key Digital Initiatives and Workforce Development

CIMB's digital transformation is exemplified by initiatives like the CIMB OCTO app in Malaysia, which saw over 110 million transactions monthly in FY2024, a 70% increase year-on-year. The group is also investing over RM100 million in 2025 to upskill its workforce in digital, AI, data, and sustainability, underscoring a commitment to future-proofing its capabilities. This strategic focus on technology and talent is crucial for its continued growth and competitiveness in the evolving ASEAN financial services landscape, especially when considering the Competitors Landscape of CIMB Group Holdings.

• Enhancing customer engagement through digital platforms like CIMB OCTO.
• Streamlining operations via AI, big data, and cloud computing.
• Investing in workforce development for future-ready skills in digital and AI.
• Utilizing fully digital banks in the Philippines and Vietnam for market expansion.
• Focusing on platform resiliency and security for core systems.

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CIMB Group Holdings Berhad is actively pursuing a robust growth strategy, focusing on key ASEAN markets. The group’s financial performance in early 2025 indicates resilience and a commitment to its strategic objectives.

Q1 2025 Financial Performance

In the first quarter ending March 31, 2025, CIMB Group reported a net profit of MYR 1.97 billion (USD 462.5 million), a 1.9% increase year-on-year. Operating income was MYR 5.5 billion, down 2.3% YoY due to net interest margin compression, though this was counterbalanced by asset growth.

Full Year 2024 Highlights

For the full financial year 2024, CIMB’s net profit grew by 10.7% YoY to RM7.7 billion (USD 1.75 billion). Operating income increased by 6.1% YoY to RM22.3 billion (USD 5.06 billion), with a return on average equity (ROE) improving to 11.2%.

Asset and Loan Growth

Total assets and loans saw increases of 5.1% and 4.4% respectively in Q1 2025 compared to the same period in 2024. The group has set a target for loan growth between 5.0% and 7.0% for FY2025, with Malaysia and Indonesia expected to be key drivers.

Income Streams and Profitability

Net interest income rose to MYR 3.82 billion in Q1 2025, while non-interest income (NOII) experienced a contraction of 8.5% to MYR 1.68 billion. The cost-to-income ratio (CIR) remained controlled at 46.9% in Q1 2025, reflecting ongoing cost management.

CIMB Group Holdings' financial outlook for 2025 and beyond is characterized by steady core net profit growth, with projections reaching MYR 8.18 billion in 2025 and MYR 8.65 billion in 2026. The bank anticipates an attractive dividend yield of approximately 5% for 2025. Analysts forecast earnings and revenue to grow by 4.9% and 6.7% per annum, respectively, with an expected ROE of 11.2% within three years. This performance aligns with the group’s strategic objectives, including its Revenue Streams & Business Model of CIMB Group Holdings, and demonstrates a commitment to enhancing shareholder value. The group maintained a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 14.7% in Q1 2025.

Projected Net Profit Growth

CIMB Group Holdings is projected to see its core net profit grow steadily into 2025 and 2026. These figures are expected to reach MYR 8.18 billion and MYR 8.65 billion, respectively.

Dividend Yield Forecast

For the financial year 2025, the bank forecasts an attractive dividend yield of approximately 5%. This reflects a commitment to returning value to shareholders.

Analyst Earnings Projections

Analysts anticipate CIMB's earnings and revenue to grow at annual rates of 4.9% and 6.7%, respectively. Earnings per share (EPS) are also expected to grow by 4.9% per annum.

Return on Equity Outlook

The return on equity is forecast to reach 11.2% within the next three years. This indicates a sustained focus on profitability and efficient capital deployment.

Capital Adequacy

CIMB Group maintained a robust capital position, evidenced by a Common Equity Tier 1 (CET1) ratio of 14.7% as of Q1 2025. This strong capital base supports its growth initiatives and operational resilience.

FY24 Dividend Payout

For FY24, CIMB declared a total annual dividend of 47.00 sen per share, representing a payout ratio of 55.5%. This amounted to a record total dividend payout of RM5.04 billion.

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CIMB Group faces significant hurdles in its growth trajectory, primarily stemming from intense market competition that can compress net interest margins. Despite asset growth, Q1 2025 saw NIM compression impacting operating income. Projections for Q4 2024 indicated lower group NIM due to policy rate adjustments in Indonesia and Thailand, alongside tight liquidity and competitive pressures in Malaysia.

Market Competition

Intense competition can lead to net interest margin compression, affecting overall profitability. This was observed in Q1 2025, despite efforts to grow assets.

Regulatory and Geopolitical Shifts

Changes in regulations and geopolitical events present ongoing risks. The group remains watchful of global megatrends and uncertainties, including trade frictions.

Exposure to Riskier Markets

Exposure to markets like Indonesia and Thailand, representing about 23% of its loan book, contributes to an elevated gross impaired loan ratio of 2.1% as of end-December 2024.

Technological Disruption

The need to adapt to technological advancements requires significant investment in skills like digital, AI, and data. This is crucial for future-proofing the workforce.

Sustainability Targets

Achieving decarbonization targets is dependent on external factors, such as the decarbonization of power grids. This presents challenges beyond the group's direct control.

Asset Quality Concerns

Thailand, in particular, shows persistent weakness with elevated impairments, especially in the auto lending portfolio, and indirect effects from global trade frictions.

To counter these challenges, CIMB has actively engaged in portfolio rebalancing and derisking since 2020, aiming to improve the quality of its loan book. Management anticipates the credit cost ratio to remain within the 30 bps-40 bps range for FY2025. Robust GIL coverage, with regulatory reserves at 123.8% as of end-December 2024 and supported by management overlays, provides a crucial buffer against potential credit deterioration. The group's commitment to risk management is further demonstrated through enhanced financing requirements for sectors like coal and palm oil, expanded exclusion lists, and the use of an Integrated Sustainability Assessment Tool for better risk evaluation of financed projects, aligning with its Target Market of CIMB Group Holdings.

Mitigation Strategies

Portfolio rebalancing and derisking efforts since 2020 aim to enhance loan book quality. Management expects credit costs to stay contained between 30 bps-40 bps for FY2025.

Financial Buffers

Strong GIL coverage of 123.8% as of end-December 2024, bolstered by management overlays, offers a significant buffer against potential credit quality declines.

Risk Management Frameworks

Enhanced financing requirements for sensitive sectors and expanded exclusion lists are part of a robust risk management approach. The Integrated Sustainability Assessment Tool aids in evaluating project risks.

Investment in Future Skills

Over RM100 million is allocated for 2025 to boost training in digital, AI, data, and sustainability, addressing technological disruption and future workforce needs.

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