By Jason Ng and P.R. Venkat
Malaysia's CIMB Group Holdings Bhd. said Friday it is planning
to cut costs at its investment banking and equities divisions
across the Asia-Pacific region as well as merge some of its units,
following a year-long review.
The Malaysian bank accelerated its review of its operations
after the collapse of an $18 billion three-way merger plan with
smaller local rivals last month.
People with knowledge of the process said earlier that the
internal restructuring could lead to job cuts and spur an exit from
some unprofitable businesses and markets, including a cutback in
investment banking. CIMB expanded its investment banking business
outside its home country massively three years ago after buying the
Asian equity operations of British bank Royal Bank of Scotland
Group PLC. RBS had offices in Hong Kong, Singapore, and Australia,
among others.
CIMB in its statement didn't disclose which businesses it plans
to exit or where layoffs would take place, but Malaysia's
second-biggest bank by assets said it intends to bring down its
cost-to-income ratio to less than 50% in the next three years, as
well as pivot its focus toward consumer banking, which it plans
would contribute to about 60% of the group's income.
"We have grown aggressively over the years and have a fantastic
platform and brand. However, we have weaknesses, and we can no
longer depend on a high growth operating environment," Zafrul
Tengku Abdul Aziz, acting group chief executive of CIMB said.
The Malaysian bank has one of the highest cost bases among the
country's lenders. At the end of September, CIMB had a
cost-to-income ratio of 58%. By the same measure, the
cost-to-income ratio for Malayan Banking Bhd., Malaysia's largest
bank, was about 50%, according to AllianceDBS Research.
The announcement comes just weeks after CIMB ended merger talks
with two other Malaysian lenders-- RHB Capital Bhd. and Malaysia
Building Society Bhd--that would have created one of Southeast
Asia's largest banking groups. The deal was called off "in light of
current economic conditions, " with the three banks saying they
couldn't arrive at a value-creating transaction for all
stakeholders. That deal would have propelled CIMB to the top of the
country's crowded banking market, while creating a megabank with
over $180 billion in assets. Malaysia is home to 27 local and
foreign lenders, with thousands of branches competing for business
in a nation of 30 million people.
The restructuring and potential cutbacks call into question the
pan-Asian strategies of the region's banks in recent years.
Last month, emerging markets-focused Standard Chartered PLC said
it was shutting its stock-trading and underwriting business and
shedding thousands of mostly Asia-based retail banking jobs.
Japan's Nomura, which bought Lehman Brothers' Asian and European
operations in 2008, began scaling back on global ambitions a few
years ago.
"We have taken a long hard look at our Asia Pacific Investment
Banking presence and we'll have to recalibrate this. Given the
realities of capital markets, we will look at reducing the overall
investment banking operating cost by about 30% in 2015," Mr. Zafrul
said.
CIMB's deal to buy parts of RBS's business almost three years
ago gave the Malaysian bank some of the British lender's cash
equities, equity capital markets and corporate-finance businesses
in Asia with around 400 people. RBS began selling off global assets
after getting bailed out by the British government during the 2008
financial crisis.
As part of the restructuring, CIMB said its current corporate
banking, treasury and markets division, and investment banking
division will be combined to form an integrated wholesale banking
division. "The strategic review has been about identifying areas
where we are but should not be, areas where we need to be better
and areas where we are already strong," Mr. Zafrul said.
CIMB's net profit fell 16% in the third quarter to 890.3 million
ringgit ($251.5 million) while its net interest margin, a measure
of profitability from lending, fell 2.86% in September compared
with 2.87% a year earlier. The company is due to report
fourth-quarter earnings by end-February.
Write to Jason Ng at jason.ng@wsj.com and P.R. Venkat at
venkat.pr@wsj.com
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