Published July 2, 2009

CIMB to revise 2009 ROE upwards

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(KUALA LUMPUR) Malaysia's No 2 lender CIMB Bank may have been too conservative when it set a return on equity (ROE) target of 12.5 per cent for 2009 and looks set to revise it when it publishes its first-half results.

Greater clarity in outlook: CEO Nazir expects merger and acquisition activity to pick up in the second half

'We may have been a little bit bearish. Based on our first-half results, we will then revise that ROE target,' chief executive officer Nazir Razak told Reuters in an interview on Tuesday.

CIMB Bank, South-east Asia's fifth-largest bank by assets, has an asset base of RM226.9 billion (S$93.5 billion) and a market value of about RM32.6 billion.

Mr Nazir, the son of Malaysia's second prime minister and the younger brother of its current one, grew CIMB to become Malaysia's second-largest bank via a series of acquisitions over the last few years.

State-controlled Maybank, which has RM308.8 billion in assets, is the country's largest lender.

Mr Nazir said that he does not foresee the bank making any more big acquisitions over the next few years.

'We have charted our path for the medium term. We are happy with the platform we have,' Mr Nazir said, adding that the bank could consider a bolt-on acquisition such as a brokerage operation in, for example, Thailand.

'We are very busy with creating value and getting the return from the enlarged platform,' said Mr Nazir, referring to the bank's recent acquisitions in Thailand and Indonesia.

Mr Nazir was instrumental in CIMB's 2005 acquisition of Singapore stockbroking firm GK Goh Securities Pte Ltd and the merger a year later with Southern Bank, a mid-sized Malaysian bank.

Last year, CIMB beat its bigger rivals, including HSBC Holdings plc and Standard Chartered Bank, to win the bid for a controlling stake in Thailand's BankThai.

The Malaysian bank also has a small presence in Indonesia through Bank CIMB Niaga.

Khazanah Nasional, the investment arm of the Malaysian government, is the largest shareholder of the bank with a 20 per cent stake.

The Employees Provident Fund, the largest pension fund in the country, controls another 15.4 per cent.

Mr Nazir said that he expects merger and acquisition activity to pick up in the second half of the year after a lacklustre first half.

'I think there is greater clarity in outlook now,' he said.

The bank's balance sheet remains healthy and does not see the need for new capital raising, he added.

'We redeemed US$300 million in sub-debt recently and replaced it with some hybrids on the holding company,' he said.

'That was just the replacement, so net-net despite the completion of various transactions, I think our capital position is very comfortable.' - Reuters