By Jason Ng and P.R. Venkat
Malaysia's CIMB Group Holdings Bhd. has launched a review of
some of its operations, which could lead to job cuts and spur an
exit from some unprofitable businesses and markets, people with
knowledge of the matter said Friday.
The Malaysian bank accelerated its review after the collapse of
an $18 billion three-way merger plan with smaller local rivals last
month. It is currently focused on CIMB's investment banking
business, people familiar with the matter told The Wall Street
Journal, but the review is also looking at other areas of the
bank's operations. The investment-banking business includes the
Asian equity operations CIMB bought from British bank Royal Bank of
Scotland Group PLC three years ago and has offices in Hong Kong,
Singapore and Australia.
It wasn't immediately clear when the review began, but an
announcement could come in the next few days, these people
said.
"The review may involve restructuring and reorganization to
lower costs, " one of the people said.
CIMB has been trying to lower its cost base, which is one of the
highest among Malaysian banks. At the end of September, Malaysia's
second largest bank by assets 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.
CIMB, RHB Capital Bhd. and Malaysia Building Society Bhd. ended
talks last month on a deal 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.
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.
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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