KUALA LUMPUR, Dec 2 — Malaysia’s second largest bank has yet to break even after buying up most of the Royal Bank of Scotland’s (RBS) Asian operations, CIMB Group chief executive Datuk Seri Nazir Razak has admitted in an interview with the Financial Times (FT).
The London-based business news paper reported the influential banker as saying that he had miscalculated the difficulties of smoothing out the costs and combining the businesses, as well as the length of time it would take to replace some of RBS’ licences that the Edinburgh-based bank wanted to retain after the April 2012 agreement.
“In terms of brand impact, we are ahead of where we wanted to be. In terms of profitability we are behind,” Nazir was quoted as saying in an interview published yesterday.
“I wanted to break even [in investment banking] this year, but there have been delays and we needed to do some right-sizing of costs,” he added.
CIMB is the only Asian bank outside Japan that has ambitions in becoming a pan-regional broker and advisory business, while other banks are sticking to commercial and retail banking and trade finance, FT reported.
Bloomberg reported Nazir last August as saying that the investment-banking business is a function of markets, and that “if the markets are effectively much slower than what we forecast, it might not meet the original target”.
CIMB purchased most of RBS’ Asia-Pacific investment banking units and cash equities last year for US$138 million (RM445 million) in its expansion drive in the region, according to Bloomberg.
FT reported that it took until the second quarter of this year to complete the RBS agreement because of licencing delays in Taiwan, Korea and India.
CIMB’s biggest problem this year, however, has been Indonesia as it accounts for about 25 per cent of group profits, Nazir was quoted as saying.
A big outflow of foreign capital from the neighbouring country and a dropping currency have decreased profit and revenue in Malaysian ringgit terms.
FT reported that CIMB’s group profits have increased by more than 7 per cent thus far this year, but quoted Citigroup analysts as expressing caution until they were certain that CIMB’s return on equity had stabilised.
They were reported as saying that they expected it to fall to 14 per cent from 16 per cent this year, but the figure is still much better than most western banks.
Nazir reportedly dismissed fears that fickle foreign investors might destabilise Southeast Asia, like what had happened in the 1997 financial crisis.
“It is like chalk and cheese. The beauty of Asean economies now is that the lessons were learnt from the Asian financial crisis,” the banker was quoted as saying.
