CIMB Group was the only banking group in Malaysia to see a plunge in profits in 2020, but has rebounded nicely in its most recent annual report. Joy Macknight reports.
The Malaysian economy has managed to come through the Covid-19 pandemic in good shape, recording strong gross domestic product growth of 8.9% in the second quarter of 2022. However, its headline inflation rate is also ticking up, hitting a 14-month high of 4.4% in July 2022, driven by record food price inflation. In response, Bank Negara Malaysia has increased its benchmark interest rate for the third consecutive time, a move last seen in 2010.
On September 8, the central bank hiked the overnight policy rate 25 basis points to 2.5%, which brought the rate to its highest level since May 2020. The Malaysian banks have subsequently revised upwards their lending rates.
Throughout the pandemic, the country’s banking sector remained strong. All five of the largest lenders – Maybank, CIMB Group, Public Bank, RHB Bank Berhad and Hong Leong Bank – increased their Tier 1 capital levels in 2021. Maybank, for example, holds $16.3bn in Tier 1.
Unlike in many other markets, most of the top Malaysian banks were also able to maintain their pre-tax profit levels over the course of the pandemic, with three – Public Bank, RHB Bank Berhad and Hong Leong Bank – increasing their profits in both 2020 and 2021.
The exception is CIMB Group, which saw its profits plummet 75%, from $1.5bn in 2019 to just $381m in 2020. However, the bank rebounded in 2021, recording profits of $1.4bn. Maybank, on the other hand, saw a 20% contraction in profits in 2020, but managed to return to pre-pandemic levels in 2021.
