Year to date, CIMB Bank’s share price has risen by at least 50% to RM8.12 ($2.46) from just under RM5.50. This significant surge reflects the growing confidence analysts, investors and shareholders have in the banking giant.
The bank most recently reported its 1HFY2024 numbers, which saw an 11.4% return on equity (ROE) and strong performance across its key markets. “If you were to reflect on our share price, which is the best indicator [of a company’s performance], I think we are one of the top banking stocks that people are investing in,” says group CEO of CIMB Singapore Victor Lee.
The bank is fast approaching the end of its Forward23+ strategy, which saw a year extension from its Forward23 master plan. The plan set targets of ROE of more than 12%, a Common Equity Tier 1 (CET1) ratio of over 13% and a cost-to-income ratio of below 45% by 2023.
The extension was due to dampened business sentiment, which has since seen a turnaround as CIMB’s robust financial results in the first half of this year have attracted attention from investors globally. “We’re way on track to deliver the KPIs. Singapore is out delivering and doing very, very well,” says Lee.
The Malaysian bank, which only operates one branch network from Singapore, saw 15% of the group’s profit before tax come from the tiny country-state in 1H2024. Singapore’s 1HFY2024 profit before tax grew 98.5% year over y-o-y and 80% q-o-q to RM798 million. This is a sizable contribution, considering the bank has 200 branches in Malaysia and 500 in Indonesia.
Undoubtedly, this growth is supported by the city-state’s status as a hub for financial services and the increasing number of mass affluent individuals in recent years. “We have attracted a lot of deposits, we have done a lot of wealth management, and bancassurance in particular, has been a big business for us,” says Lee.
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Today, CIMB is the leading insurance bank in Singapore, following the three incumbent banks. It is also the largest foreign bank in the country, distributing products from around seven life insurance companies.
Competitive products
Singapore’s financial landscape is dominated by local heavyweights like DBS, OCBC and UOB, making it challenging for foreign players. Nevertheless, CIMB has successfully carved out a niche by offering competitive products in the consumer and commercial banking sectors. By mid-2024, CIMB had expanded its customer base to over half a million in Singapore, establishing a strong presence in retail banking and wealth management.
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One critical element of CIMB’s success is its ability to offer market-leading deposit rates. While most banks offer minimal returns on savings accounts, CIMB has differentiated itself by offering up to 3.3% interest on savings deposits. This move has attracted significant liquidity to the bank, enabling it to provide competitive lending products and generate robust interest income. The seamless account opening process that the bank offers new-to-bank customers bolsters this.
“Competition only motivates us to deliver better value to our customers,” says Lee. “Our straightforward, high-interest savings accounts resonate with consumers who are looking for better returns on their deposits without the complex terms and conditions that other banks impose. This simplicity is what sets us apart.”
Likewise, its commercial banking division, which focuses on small and medium enterprises (SMEs) from mom-and-pop shops all the way to listed mid-capitalisation companies, has seen strong growth as well. Commercial loans rose by 5.8% y-o-y during the first half of 2024.
For one, SMEs find that their basic current account needs can be serviced at CIMB. The CIMB business accounts enjoy 2.68% per annum (p.a.) on the CIMB SGD BusinessGo account and 3.88% p.a. with the CIMB USD Interest Plus Current Account. Singapore dollar deposits are insured up to $100,000 by the Singapore Deposit Insurance Corporation.
Lee says that despite the recent interest rate cuts by the US Federal Reserve, which is expected to result in bank rate cuts back home, CIMB will keep its rates unchanged until next year.
Many SMEs opt to lend with CIMB due to its zero transaction fees and competitive currency rates between Singapore dollars, Malaysian ringgit and Indonesian rupiah. This highlights the bank’s unique position as a regional player with strong ties to three Asean nations, making it a natural partner for businesses seeking to expand across borders.
“We are uniquely positioned to serve as a gateway between Singapore and Malaysia for businesses,” adds Lee. “Our extensive footprint in Asean, particularly in Malaysia, allows us to offer unparalleled cross-border services.”
Other growth drivers
Another pillar of CIMB’s growth strategy in Singapore is its strong position in bancassurance. The bank has established partnerships with seven different insurance providers, allowing it to offer a wide range of products to its customers. This flexible approach contrasts with some local banks that limit themselves to a single insurance partner.
“Bancassurance is a critical component of our offering in Singapore, especially as we target the mass affluent and high-net-worth segments. By working with multiple insurers, we ensure that our customers can choose the best product for their needs. This customer-first approach has helped us capture a significant share of the bancassurance market,” says Lee.
As Singapore continues to grow as a wealth hub attracting mass affluence, CIMB has positioned itself as a go-to partner for clients looking for personalised financial solutions. The bank’s relationship managers (RMs) play a vital role in this, maintaining a low attrition rate and providing consistent, high-quality service to clients.
“Having a stable workforce and RMs that really care for their customers is really the secret sauce that we have that differentiates us from other banks,” says Lee. “You can buy the same mutual fund or bond from any bank, but the difference is having RMs that really care for the customers and don’t just care about earning and making an incentive on a sale.”
Yet, all this success could not have been achieved without its digitalisation efforts. CIMB has fully automated its account opening process for SMEs, allowing them to open accounts in just 15 minutes, and requires only three out of 13 supporting documents, a significant improvement over the industry standard.
The integration of BizChannel@CIMB, the bank’s online banking platform, into the SME account opening process, has made it even easier for businesses to get started. “Our digital-first approach gives us a competitive edge in terms of customer experience. We believe that value and simplicity are key to retaining and growing our customer base, especially in such a fast-paced market like Singapore,” adds Lee.
CIMB’s digital push extends beyond account management. The bank has also introduced initiatives such as CTO-as-a-service, helping SMEs adopt technology solutions that improve their operations. Through partnerships with external providers, CIMB offers digital tools that help SMEs track and reduce their carbon footprints — a service that has gained popularity as more businesses look to enhance their sustainability credentials.
Strategic vision
As CIMB approaches the end of its Forward23+ strategy, the bank is already looking towards its next phase of growth. The first half of 2024 saw continued improvement across all key financial metrics, with net interest income growing by 6.7% y-o-y and non-interest income up by 13.2%. Despite rising costs associated with digital investments, the bank managed to keep its cost-to-income ratio below 46%.
In Singapore, CIMB’s focus remains on growing its market share in both consumer and commercial banking. The bank’s digitalisation efforts will continue, with plans to further expand its cloud-based infrastructure to enhance operational resilience. Additionally, CIMB aims to increase its presence in the mass affluent segment by offering personalised, relationship-based banking services through its highly regarded relationship managers.
The bank has demonstrated its commitment to sustainability, particularly through its support for SMEs aiming to enhance their ESG (environmental, social and governance) practices. By providing rebates to businesses that reduce their carbon footprints, CIMB is not only assisting companies in becoming more sustainable but also establishing itself as a responsible corporate citizen in a rapidly changing world.
CIMB’s performance in Singapore reflects a broader strategic vision that integrates customer-centric innovation, digital transformation and regional connectivity. As the bank prepares to unveil its new strategic plan in early 2025, it remains committed to delivering value to both its customers and shareholders.
