KUALA LUMPUR (Aug 28): CIMB Group Holdings Bhd is expecting its provisions for loans to remain elevated — with a 120 to 140 basis points (bps) guidance — for the current financial year ended December 31, 2020.

“This is coming from two factors. The additional provisions to account from macroeconomic factors under MFRS9, and we will and have been taking specific accounts and impairments especially for accounts outside Malaysia,” CIMB’s group chief executive officer Datuk Abdul Rahman Ahmad told reporters at a virtual press conference today on the group’s first half of 2020 financial results.

For the financial year ended Dec 31, 2019, CIMB's gross impaired ratio was at 3.1%.

Declining to comment on specific names that could impact the asset quality of the group, CIMB group chief financial officer Khairul Rifaie said that there are “two chunky” borrowers from within the oil and gas sector.

“There are areas in terms of the broader macroeconomic factors and broadly specific impairments outside Malaysia,” he added.

The ratio has increased to 3.6% as at June 30, 2020.

Elaborating on this, Abdul Rahman said impairments from outside of Malaysia are generally focused on Singapore and it also includes the leisure and hospitality sector.

Previously, it was reported that CIMB is said to have a significant loan exposure of over US$100 million to Singapore’s troubled oil trader Hin Leong Trading, which has sunk into massive US$800 million losses. The gap between the Singapore-based company's assets and its liabilities was reported to stand at US$3.34 billion.

There is also market talk that CIMB is one of Genting Hong Kong Ltd’s lenders in Malaysia.

When asked about this, Abdul Rahman replied that he will “not comment on specific names".

The Hong Kong-based cruise operator had announced last week that it has to suspend payments to all creditors to preserve as much cash as possible to sustain its operations.

At 5pm today, shares of CIMB closed seven sen or 2.08% lower at RM3.30, valuing the bank at RM32.75 billion. At RM3.30, the stock is trading at 0.6 times price to book.

Year to date, the counter is down 36% from RM5.15.

Edited by Joyce Goh

Read also:
CIMB foresees 10-15 bps net interest margin compression in FY20 
CIMB opts for no dividend in 2Q to prioritise liquidity management 
No dividends from CIMB in 2Q, but bank still committed to 40%-60% dividend policy