KUALA LUMPUR: Thailand is a challenging market for CIMB Group Holdings Bhd due to the structure of the economy that has capped net interest margin (NIM) at a certain number.
Its group chief executive officer Novan Amirudin said for comparison, some of the big banks in Thailand are only making between eight and nine per cent return on equity (RoE).
"Thailand is a brutal market, it is quite challenging right now. If you just look across all the banks in Thailand, structurally even the largest banks are making eight to nine per cent RoE, with the exception of a few very specialised boutique institutions that target certain sub segments.
"The reason why RoE is as such is because Thailand is an interesting market today and you have to operate at a certain credit cost of between 130-150 basis point, but the NIMs do not justify the credit cost because of the structure of the economy itself.
"That's why we are seeing what we are seeing today in Thailand. Given a certain risk profile, NIM capped at a certain number and large players are okay operating at 8-9 per cent RoE," he said in media briefing on the group's financial results for the second quarter today.
To mitigate the problem, Novan said the group is looking at key segments and sub segments that it can participate in Thailand.
"There are a few players out there who are very specialised, targeting certain sub-segments so that is something we need to be clinical of," he said.
CIMB Thai Bank PCL posted a net profit of 1.29 billion baht (RM166.47 million) in the first half 2024 (1H24), representing a 5.4 per cent decrease from the same period in 2023.
The drag in earnings was due to a decline in operating income and increased expenses. In a statement, the bank said its operating income was down 1.7 per cent due to lower net fee and service income of 28.3 million baht.