Update CIMB well capitalised to support overseas units

KUALA LUMPUR: CIMB Group Holdings Bhd will not need to raise capital even if it were to inject equity into its subsidiaries in Indonesia and Thailand, as the Malaysian banking group is well-capitalised, said its group CEO Datuk Seri Nazir Razak.

He said the banking group had a total risk-weighted capital ratio in excess of 15% currently and hence was in a comfortable position to support its overseas subsidiaries PT Bank CIMB Niaga and CIMB Thai Bank pcl.

"There is no issue of CIMB (being) in need of capital or equity capital. The rights issue in CIMB Thai is only RM300 million maximum and similarly, in Indonesia, even if we were to contemplate (a rights issue), the amount will also not be significant.

"Both CIMB Thai and Niaga also have ample capabilities to fund their operations via bonds as opposed to equities," Nazir told reporters after signing a US$300 million (RM981 million) loan facility agreement with Japan Bank of International Cooperation (JBIC) here on Monday, March 29.

Recently, CIMB's Indonesian and Thai subsidiaries announced plans to beef up their capital.

Nazir said CIMB Niaga currently had no plans to raise capital via equity, but would issue US$300 million of subordinated debt papers that was announced last week.

He said discussion on whether CIMB Niaga would require a rights issue was ongoing and whether the subsidiary would make a cash call depended on its growth momentum.

CIMB Niaga president director Arwin Rasyid, who was also at the signing ceremony, said the bank would expand its branch network to capture higher loans growth this year.

"For this year, the central bank of Indonesia has projected the loan growth industry average to be over 20%, and we will see CIMB Niaga achieving along that range or even higher," he said.

For CIMB Thai, the bank had last week announced that it would raise three billion baht via a two-for-nine rights issue at one baht (10.1 sen) each and sell up to six billion baht of subordinated debt papers.

The bank is also seeking shareholders' approval to divest its 99.99% stake in wholly owned bad bank unit Sathorn Asset Management to its parent CIMB Group for about RM23 million.

CIMB Thai president Subhak Siwaraksa said as part of the bank's restructuring exercise, it would divest 99.99% of mutual fund management company BT Asset Management Co Ltd to CIMB-Principal Asset Management Bhd and sell a 20% stake in Worldclass Rent A Car Co to CIMB Group for a total of RM20 million to RM30 million. Nazir said CIMB Thai would be listed in June this year.

Later, Subhak told The Edge Financial Daily that upon receiving the central bank of Thailand's and shareholders' approval, the bank would sell the shares of the bad bank unit to CIMB Group.

After the stake sale, CIMB Thai could potentially sell to Sathorn non-performing loans (NPLs) with a nominal value of RM500 million but the book value could be between RM200 million and RM300 million, he said.

Subhak added that CIMB Group would then inject additional capital into Sathorn to enable the bad bank unit to acquire more NPLs from CIMB Thai.

"From CIMB Thai's perspective, it (Sathorn) will be de-consolidated from the bank. By doing so, the gross NPLs in our books will be reduced to not more than 5% from 10% currently. CIMB Thai will have one of the lowest NPL ratios among Thai banks," he said.

Meanwhile, the US$300 million JBIC Asean Facility is the largest JBIC facility provided to a commercial bank and the first to be channelled directly to businesses across the region via a single banking group.

Nazir said the loans, which are mainly for small and medium businesses, would be channelled to Japanese and domestic companies that have dealings with Japanese firms in Asean countries via CIMB Bank, CIMB Niaga and CIMB Thai.

JBIC resident executive officer for Asia and Oceania Ryuichi Kaga said CIMB Group's regional presence was the driving factor behind JBIC's decision to partner the group for the loan facility.

On another matter, Nazir declined to comment on a news report that said CIMB Investment Bank pitched for advisory, placement and underwriting work for the initial public offering of Bumi Armada Bhd, but "confirmed" that he was interested in "nice" transactions.