The last five years have seen CIMB Group Holdings Bhd working diligently to improve its return on equity (ROE) — a key measure of profitability — and other important financial metrics that had fallen behind those of its rivals.
This turnaround work, crafted under its Forward23+ (F23+) strategic plan that concluded last year, seems to have paid off for the country’s second, and Asean’s fifth, largest banking group by assets.
Its ROE, which had sunk to a low of 2.1% in 2020 — the first year of the pandemic — has risen markedly over the years, reaching 11.2% in 2024, among the highest in the industry and within its targeted range of 11% to 11.5%. (Its original target was 11.5% to 12.5%, but this was revised sometime mid-term to take into account the industry’s stiff fight for deposits, which took a toll on banks’ net interest margins.)
For perspective, Malayan Banking Bhd’s ROE stood at 11.1% in 2024, while Public Bank Bhd’s was 13.2%.
CIMB’s cost-to-income ratio (CIR) — a measure of efficiency — managed to come down to 46.7% in 2024 from 51.7% in 2020, while its gross impaired loan ratio — an indicator of asset quality — improved significantly to 2.1% from 3.6%.
Notably, its net profit rose to a record high of RM7.73 billion ($2.3 billion) for FY2024 ended Dec 31, 2024 — up 10.7% y-o-y — and it declared its highest ever annual dividend of RM0.47 a share that year, which included a special dividend of seven sen a share for the second straight year.
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Now that it is back on a stronger footing, CIMB wants to accelerate its growth, group CEO Novan Amirudin says. CIMB is open to undertaking M&A to grow, if a good opportunity arises and it brings value to the group.
“It doesn’t have to be one large M&A. It can be smaller bite-sized opportunities,” Novan tells The Edge Malaysia in an exclusive interview, his first since taking on the top job on July 1 last year. “We roughly know what is out there [in terms of M&A opportunities]. But, I don’t see anything highly actionable that makes sense for us at the moment.”
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He reveals that the group had its eye on Indonesia’s Bank Commonwealth last year, but lost out on that opportunity to OCBC, whose Indonesian arm acquired the lender for IDR2.2 trillion ($178 million) in May.
Recent news reports, including by The Edge Malaysia, indicate that CIMB is keen on a sizeable stake in Bank Pan Indonesia (Panin Bank) which is reportedly up for sale. Novan, however, declines comment when pressed about Panin Bank.
Novan is an old hand at M&A, having come from an investment banking background. He took up the reins from Datuk Abdul Rahman Ahmad, who left CIMB after four years to take on the role of Permodalan Nasional Bhd president and group chief executive for the second time.
CIMB’s biggest shareholders are Khazanah Nasional Bhd with a 21.54% stake, followed by the Employees Provident Fund with 16.98%, Amanah Saham Nasional Bhd with 9.88% and Retirement Fund Inc (KWAP) with 6.08%.
Transforming under Forward 30
On March 5, Novan introduced to the investment community CIMB’s new strategic plan, called Forward30 (F30), that will run for the next six years to FY2030.
“I always believe that you have to keep transforming because if you don’t, those around you will, and you will get relegated down. So, while we are happy with what we’ve achieved so far — we hit most of our F23+ targets — we need to embark on the next wave of transformation,” he states.
The F30 plan, designed to accelerate CIMB’s growth, sees it ultimately aiming to achieve a top quartile ROE among regional peers by FY2030. While it did not attach a specific number to its ROE goal, the shorter-term target is to achieve a ROE of 12% to 13% by FY2027.
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Its other targets to achieve by FY2030 are: a Top 3 position in net promoter score, which is a gauge of customer service; a CASA (current account and savings account) ratio of 45%; a non-interest income ratio of 33% to 34%; and a CIR in the low 40% range. Meanwhile, credit cost is expected to normalise to about 40 to 50 basis points (bps), from 25bps in 2024.
To achieve these targets, CIMB will focus on: (1) reallocating and optimising its capital and resources to strengthen its overall portfolio, (2) building a leading deposit franchise to reduce its cost of funds by 10bps to 20bps by 2030, (3) doing more cross-selling to generate better returns, and (4) improving its capabilities through a “simpler, better, faster” approach to increase productivity and efficiency.
On capital allocation, Novan says CIMB intends to optimise allocation towards its “higher-return versus risk and probability of success” countries — namely Malaysia, Indonesia and Singapore — and businesses such as commercial banking and wealth management.
“Today, 54% of our capital is in Malaysia and we get back 57% in earnings, and the ROE is about 11%. In Indonesia, we have 19% of our capital there, but we get back 25% in earnings and ROE is about 14.6%. At the other extreme is Thailand, where we have 12% of our capital but are only getting back 4% in earnings, and the ROE is about 5.9%.
“When we re-evaluate our portfolio, we find this is not optimal. We need to reallocate our capital to areas that bring in better returns versus risk, with higher probability of success,” he adds.
Thailand, with its sluggish economic growth and political uncertainties, has been a challenging market for the group for some years now. Be that as it may, there are no plans to exit the country, Novan says.
CIMB wants to reshape its consumer banking business there and is considering options.
“We need to study Thailand. It’s a 2% GDP (gross domestic product) market and it’s been challenging, but it remains an important market for us. We want to be very niche in the areas we are strong at there, which is wholesale banking, wealth,” he says.
In Malaysia, CIMB plans to accelerate growth in commercial banking — under which its small and medium enterprise business falls — while maintaining the pace of its consumer and wholesale banking businesses.
As for Singapore, where it currently has only one branch, it aims to be the top challenger bank, focusing on growing its Asean corporate network and wealth management business.
“There were two branches before, now it’s just one, but that one branch brings in 13% of our [pre-tax] profit,” he remarks.
Shariah spin-off in Indonesia
It will be interesting to watch CIMB’s developments in Indonesia over the next few years. Apart from potential M&A moves there, its Indonesian subsidiary — Bank CIMB Niaga — is expected to spin off its Islamic banking business next year.
“By law, we need to get the spin-off done by [the end of] next year, but we are planning for it already,” Novan shares.
He sees this as a huge opportunity for CIMB to truly solidify its position as the second largest Islamic bank there after Bank Syariah Indonesia (BSI). Though Indonesia is the world’s most populous Muslim nation, only 8% of the country’s banking assets is Islamic compared with over 40% in Malaysia.
“There is a lot of upside, so I’m quite excited about this opportunity. Yes, BSI is the No 1 player, but there will be people who will want to diversify their funds. Not everyone will want to keep all their funds in one bank. That is where we come in,” he says.
Indonesia mandates a spin-off — basically, a separation — of shariah business units exceeding IDR50 trillion (RM13.57 million) in assets or holding more than half of the parent bank’s assets. These units have to be converted into separate banks or transferred to other banks by the end of 2026.
BSI was created in 2021 from the merger of the Islamic banking units of three state-owned lenders, including Bank Mandiri.
In Indonesia, CIMB is aiming to be the most profitable bank in the so-called KBMI 3 category, which groups together lenders with a core capital of between IDR14 trillion and IDR70 trillion.
Bank CIMB Niaga is understood to be the sixth largest by assets there, with total assets of IDR360.2 trillion as at the end of 2024.
Despite the strong prospects in Indonesia, it is expected to be a tough market for banks given the tighter liquidity there.
Analysts say CIMB’s net interest margin at the group level may continue to come down this year, albeit by not more than 5bps because of funding cost pressures from its overseas markets, especially Indonesia.
Rising challenges
With growing geopolitical tensions and economic uncertainties globally, it remains to be seen if CIMB can deliver on its F30 targets as intended.
Acknowledging that it will be challenging, Novan nevertheless points out that F30 was designed to navigate a complex and uncertain world.
“It is all down to execution. To me, that’s the key,” he says.
As at March 7, most analysts had a “buy” call on CIMB. The share price, which has more than doubled over the last five years, hitting a high of RM8.44 on Sept 20 last year, closed at RM7.52 last Friday, valuing CIMB at RM80.71 billion.
“Even though we find a lot of strategies and focus areas are similar to those of its rivals, we reckon execution is key and to back this up, CIMB has shown its capabilities to deliver results over the past four years. Also, the bank still has a lot of levers to pull to help achieve its shorter-term ROE target of 12% to 13% in 2027,” says Hong leong Investment Bank Research in a March 5 report.
CIMB Group Holdings Bhd’s chief Novan Amirudin relishes a good challenge / Photo: Low Yen Yeing of The Edge Malaysia
CIMB chief takes challenges in his stride
CIMB Group Holdings Bhd’s chief Novan Amirudin is looking forward to tackling the ups and downs that come with the bank’s ambition of growing at a faster pace over the next six years.He is someone who relishes a good challenge.
“To me, I always enjoy it when I’m learning and growing — and, yes, I’m definitely learning and growing,” says Novan, who came on board as group CEO of the country’s second-largest banking group by assets last July.
Speaking to The Edge Malaysia in his first interview since taking the helm, Novan, 45 this year, comes across as someone who is enthusiastic and driven.
It is late afternoon on the first working day of Ramadan and Novan, who is fasting, shows no sign of wear as he talks to The Edge for two hours, mainly about the group’s new six-year strategy, Forward30 (F30).
The last eight months or so have been a steep learning curve for Novan, who comes from a largely investment banking and corporate finance background. CIMB’s key businesses are mainly consumer, commercial and wholesale banking (under which investment banking falls).
A chartered accountant, he had spent almost 16 years with JPMorgan, his last position being head of equity capital markets for Southeast Asia and head of investment banking for Malaysia. In July 2022, he joined CIMB as co-CEO of group wholesale banking.
Two years later, in a move that surprised some, he was picked to head CIMB.
“I’m generally the type of person who takes it as it comes,” he says, when asked about his initial reaction to being chosen for the role. “I guess it was mixed feelings — surprised, but also honoured and privileged at being given the opportunity to serve this exceptional organisation. And I will return that trust by giving 120% [of my effort].”
Industry observers point out that Novan will not be the first leader at CIMB to have had to learn quickly on the job.
His immediate predecessor, Datuk Abdul Rahman Ahmad — who returned to Permodalan Nasional Bhd last year as its president and group chief executive — did not have a banking background when he took the helm at CIMB in 2020. And, Tan Sri Nazir Razak, who was group CEO from 1999 to 2014 and later its chairman until end-2018, also came from an investment banking background. Both leaders were instrumental in taking CIMB to new heights over the years.
Now, all eyes will be on Novan to see whether he can do the same. Under F30, CIMB aims to achieve top-quartile return on equity (ROE) among regional peers by FY2030 ending Dec 31, 2030. The shorter-term target is to achieve an ROE of 12% to 13% by FY2027, from 11.2% in FY2024.
Describing himself as “a family person”, Novan enjoys playing golf with his wife and two teenage boys over the weekends. “Golf is like family time for us,” he says.
Below are excerpts from the interview.
The Edge Malaysia
Novan Amirudin: I’m learning every day. It’s been a very humbling journey and I’m very fortunate to have strong and supportive stakeholders. When I was running wholesale and investment banking, it was about running the business operations. Now, it’s a different type of role — it involves capital allocation, stakeholder management across the entire group, and operations.
Are you liking it?
Yes, I think it’s fun. To me, I always enjoy it when I’m learning and growing — and yes, I’m definitely learning and growing.
Does CIMB have an appetite for inorganic growth under the F30 strategy?
Yes, we’re always open to it. There was a point in time when we did a lot of M&A. Then, we tried to integrate the businesses. We feel now we’ve come to the point where we’ve already integrated [those businesses] and we’ve earned the right to do M&A play again. And M&A doesn’t need to be one large big M&A. It can be smaller bite-sized opportunities.
For example, when our Chinese partner [CGS] exercised the option to buy us out from our stockbroking partnership, we then went on to buy KAF Securities, and now operate CIMB Securities. In Indonesia last year, we were looking at Commonwealth Bank, but we lost out to OCBC. So, we are always looking at opportunities.
There’s an expectation that there could be attempts at bank M&A in Malaysia this year. Would CIMB actively undertake bank M&A, or is it something you’d consider only if a proposal came to your table?
There must be a value proposition for an M&A to happen. And, it must be a win-win for all the parties involved. From my perspective, until you have those two tenets, there’s nothing much to comment on any M&A.
We know that we have a 2030 plan. We know that we want to grow to a certain size. It can be done organically and it can be done inorganically. We are open to M&A, but whatever it is, it must be the best deal. And it must be in the areas that make sense for us to reallocate our capital.
In Indonesia, in particular, is there merit for expansion?
Yes, I mean, it’s a large population. It’s still [among] the highest ROE (return on equity) market for us. And if you want to aspire to become best-in-class ROE, clearly it’s an important market.
How might NIMs (net interest margins) pan out in 2025 as a group and in Indonesia in particular?
It will all depend on how interest rates move within the countries. You saw rate cuts in Indonesia and Thailand this year. When rates are cut, asset prices come down, and we then need to reduce cost of funds to protect NIM. But if liquidity is tight and competition is intense, such as what’s being observed in Indonesia, you cannot cut deposit rates, so then NIMs come under pressure.
So group NIM won’t stabilise this year?
No, I think NIM will come down because Indonesia makes up 25% of our business. But we can offset some of the pressure this year through healthier loan growth. We do see that the current geopolitical uncertainties will create more opportunities within Asean, and we do see a lot more opportunity for loan growth. That increase in loan growth will offset the decline in NIM. We expect stronger loan growth of 5% to 7% this year, from 4.8% last year.
What can you guide on dividends going forward? Is there a need to be conservative given the latest Basel III requirements?
No, we are okay. We’ve guided the market that we’re maintaining our 55% payout ratio.
For two years in a row now, you’ve paid special dividends. Is that something that can be continued?
If there is excess capital, yes. To me, if we don’t reinvest the capital to earn better returns, we’re better off returning the capital to shareholders, and that’s what we did over the last two years. So if there’s excess capital and there’s no better way to deploy it, then we will return it to shareholders.
Are there any areas of concern for you when it comes to the bank’s asset quality? Your gross impaired loan (GIL) ratio used to be the highest but it’s improved strongly.
No, we are in a good place. One of the things we did over the last five years was drive an awareness into safeguarding the bank. And that really helped, and translated into an improvement in asset quality. So, you not only see that GIL went down, we are also seeing ECL (expected credit loss) coming down, and loan loss coverage (LLC) coming up. We’re at 105% LLC. I think we are in a very good place right now with regards to asset quality.
How much have you slated for technology investments in the F30 strategic plan? Is it more than in the previous plan?
We think of technology investments as a percentage of our income. We roughly budget every year for about 7% to 9% of our income to go towards technology investments. And we’ve been doing that quite consistently. So we’re going to maintain that ratio.
Can CIMB deliver on its Forward30 plan?
Analysts largely believe that CIMB Group Holdings Bhd’s Forward30 (F30) strategic plan — which aims to boost return on equity (ROE) to 12%-13% by 2027, from 11.2% in 2024, and ultimately position CIMB among Asean’s top quartile by 2030 — is not beyond reach, given its strong regional presence, solid capital position and clear focus on growth.
Yet, beneath the optimism, the six-year plan may also see hurdles in the form of execution risks, economic headwinds and the ever-present challenge of maintaining cost discipline.
Affin Hwang Investment Bank analyst Tan Ei Leen sees the plan as crucial for CIMB in future-proofing its position and driving its sustainable growth, but she cautions that headwinds remain.
“At this juncture, we have not factored in the potential for CIMB to scale or optimise its capital in our model as there are other factors like rising geopolitical risks, which could derail many of our assumptions,” Tan tells The Edge. Affin Hwang nevertheless has a “buy” call with a RM9 ($2.71) target price on CIMB.
The F30 targets CIMB aims to achieve by 2030 are: (i) to increase the casa (current account saving account) ratio to 45% (from 43.1% in 2024) so as to lower funding costs by 10 to 20 basis points; (ii) raise non-interest income contribution to 33%-34% (from 31% in 2024) through enhanced cross-selling, wealth management and wholesale banking; (iii) lower the cost-to-income ratio to the low 40% range (from 46.7% in 2024), as well as optimise the common equity tier 1 (CET1) ratio to 13%-14% (versus 14.6% in 2024).
Nomura Research says that on the whole, it is “positive” on CIMB’s F30 plan. “That said, in the near term, the key challenge which the bank is facing is the deteriorating Indonesia banking-sector liquidity squeeze, Thailand asset quality/subpar return profile, along with broader geopolitical uncertainties. We think CIMB’s group ROE target of 11%–11.5% in the first year of F30, while seemingly flattish versus FY2024’s 11.2% achievement, is conservative precisely to take into account Indonesia’s macro concerns,” its banking analyst Tushar Mohata says in a March 5 report. The 2030 targets are, however, “reasonable and achievable”, given the long time horizon, he opines.
“That said, we think the group has to shift gears again to grow the commercial business, after scaling it down during Forward23+ [the previous five-year strategic plan], which might take some time, given the other competing banks’ focus on this segment too. Note that almost one-third of senior management’s total compensation is linked to delivering ROE targets, with the remaining split equally between fixed pay and balanced-scorecard performance,” he says.
MIDF head of research Imran Yassin Md Yusof believes it is not a “big task” for CIMB to achieve an ROE — a key measure of profitability — of at least 12% in the mid-term, given that its current ROE is not far off, at 11.2%.
MIDF, which has a “buy” call and RM9.15 target price on the stock, favours CIMB’s ambition to maintain a 55% dividend payout ratio under F30, which is seen as a positive signal for investors as the bank balances profitability with shareholder returns.
“Investors should take it as good news. Achieving this ROE but then still maintaining [the dividend payout] without sacrificing the rewards to shareholders is pretty important, and this is done by optimising the CET1 ratio,” Imran says.
AskEdge data show that CIMB offers a trailing 12-month dividend yield of 7% based on last Thursday’s closing price of RM7.50. (Note that AskEdge’s dividend yield only takes into account dividends that have gone ex.)The banking group, the country’s second largest by assets, declared a total dividend per share of 47 sen for FY2024 ended Dec 31, 2024 — its highest annual payout ever.
CGS International, meanwhile, believes that CIMB will find it a challenging task to lower its cost-to-income ratio to the low 40% range over the next six years.
“The bank would have to continue to incur additional costs for business growth while total operating revenue growth would be at single rates per annum in the next six years. To achieve this, CIMB would have to exercise significant cost discipline and utilise technology (including artificial intelligence) to reduce some of its costs, in our view,” CGS said in its note following the F30 strategy presentation.
Under the F30 strategy, CIMB intends to reallocate capital towards high-return businesses in commercial and wealth banking, particularly in Indonesia and Singapore, while focusing on cost optimisation in Thailand — and this is where CIMB may face execution risks, particularly in Indonesia.
“CIMB Niaga (a 92.5%-owned Indonesian subsidiary of CIMB) would be my main concern, as we do believe Malaysia operations to be relatively resilient, whereas Indonesia is juggling with funding cost pressures,” Kenanga Research banking analyst Clement Chua says.
Bloomberg data show that 16 analysts have a “buy” call on CIMB’s stock and five have a “hold” recommendation. There are no “sell” calls. The 12-month average target price is RM8.87, which suggests an upside potential of 18% from its closing price of RM7.52 last Friday. At that price, CIMB has a market value of RM80.7 billion.
The counter, however, has dropped 8.3% so far this year.
“All in all, we are of the view that CIMB is in a sweet spot to capture the promising growth of Asean’s future on the back of the young and affluent population, rising intra-Asean trade and economic integration, and sustainable influx of foreign direct investments (FDIs). CIMB continues to offer an attractive value proposition as a proxy to Malaysia’s rising dominance in Asean as a hub for FDIs and data centres,” Affin Hwang says in a March 5 report.
“The recent selldown on CIMB is unjustified in our view as the market may be concerned about underlying risks, given management’s conservative guidance on its 2025 ROE target of 11%–11.5% as well as credit/market risks of operating in Indonesia due to the tightening in system liquidity,” it adds.
