CIMB Thai’s de-risking and cost optimisation pays off

Moody’s Ratings says its asset quality, profitability and liquidity is “modest”.

CIMB Thai’s de-risking and cost optimisation initiatives, as well as prudent capital management, has paid off: its solvency has improved, whilst asset quality and profitability are “modest”, says Moody’s Ratings.

The bank’s conservative approach toward provisioning and capital management since 2019, and CIMB Thai’s regulatory capital and liquidity metrics to remain stable and well above minimum requirements, the ratings agency said in its latest ratings commentary of the bank, where it improved CIMB Thai’s deposit and issuer ratings to Baa1 from Baa2.

Moody's also expects that CIMB Bank will enjoy support in times of need.

Problem loan ratio will remain stable at 3.5% over the next 12-18 months, supported by its efforts to de-risk its loan portfolio from 2019.

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“CIMB Thai has been exiting small- and medium enterprise lending, which was the main source of its legacy bad loans. Nevertheless, the bank continues to face risks arising from its exposure to Thailand's heavily indebted households as well as high single-party concentration,” Moody’s said.

Return on tangible assets is expected to remain modest at 0.5% through 2025. This is because the bank lacks economies of scale given its small franchise in Thailand.

Credit costs are forecast to come in lower than in 2023, and net interest margin will also ease as CIMB Thai decreases its low-yielding securities portfolio, which it had built up since Q4 2023 for trading purposes, Moody’s said.

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“CIMB Thai has historically been prudent in its capital and liquidity management. Moody's expects the bank's regulatory capital and liquidity metrics to remain stable and well above minimum requirements,” the ratings agency stated.