Cimb Group Hldgs Bhd Ord

Good afternoon, ladies and gentlemen, and welcome to CID Group's Financial Resource Briefing for the second quarter of 2026. Our host today is CID Group CEO, Noban Ameruddin, and Group CFSO, Khairul Ripai. My name is Steven from the CID IR team. You should have received the analyst presentation and financial statements via email from the group IR email. Otherwise, you may find the documents in the IR section of our website at cib.com. Please be informed that this briefing is being recorded. Also, please include your name and copy on the Teams app to allow us to identify you. All participants' slides are currently on mute and you have the opportunity to ask questions after the presentation by using the raise hand function. At this juncture, I would like to hand over the briefing to Norman and Cairo. Norman, over to you.

Thank you very much, Steven. Good afternoon, everyone, and thank you for joining us today. I am pleased to share our second quarter 26 performance. It has been a very resilient performance. In fact, we're seeing very good momentum as we move from the first quarter to the second quarter. So for the second quarter, we delivered a net profit of RM1.94 billion, which then translates to an annualised ROE of 11.2% for the quarter. And the earnings momentum that we're seeing is as a result of the transformation activities that we have been doing with regards to Forward 30, which we started. Group Hldgs Bhd With regards to capital, we have been assessing the underperforming businesses within our portfolio. We've been assessing businesses where, you know, would have difficulties in terms of scaling up by 2030. And we're taking very, very decisive actions. We started with the divestment of our Thai auto business, which we scheduled to complete on schedule by the fourth quarter. Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd On the cross-sell side, a lot of focus on our regional wholesale presence. We've made a number of new hires across the bank. We're operating wholesale very differently, very centrally focused. That has basically allowed us to capture a lot of the opportunities that we're seeing coming up in the recent structural shifts that we're seeing across ASEAN. mainly on the AI data centers, wealth, as well as cross-border trades. These three themes are basically driving a lot of the growth that we see in the momentum that we have in the second quarter. And then on the capability side, a lot of focus has gone in over the last one and a half years to make ourselves simpler, better and faster. It's about making our processes more efficient and then once the processes are more efficient, we then apply technology and AI to make it better. We're starting to be able to extract value from the simpler matter faster transformation by reducing cost. Cost is coming down. If you look at our cost over the last couple of quarters, it is trending down and we expect effects to come down some more. But all in all, the transformation exercise under Forward 30 with regards to the 4Cs, is taking shape, it is accelerating, it is creating a differentiated franchise for us, which then allows us to capture the growth opportunities that we are seeing. So despite the challenging backdrop, despite what everyone is seeing in Indonesia, despite what people are seeing in Thailand, The transformation exercise that we have has been able to mitigate all these challenges. And therefore, for the second quarter, both NII and NOII are up quarter and quarter. Impact on the NII side is really bled by growth in assets and loans, up 2.2% and 1.1%. Hldgs Bhd Ord NYI saw 6% growth quarter and quarter, mainly driven by the themes that I mentioned earlier around wealth and cross-border. So we're seeing higher franchise fees and we're seeing a sustained level of client sales momentum, whether is it in the wealth business or whether is it in the treasury client sales business. And then our transformation to become simpler, better, faster. I mentioned earlier about the OPEX declining. Cost-to-income ratio for the quarter is 45.2%. As the quality remains stable, Jio has improved to an all-time low of 1.6%. As a result, we are declaring a dividend of $0.1965 per share, which translates to a payout ratio of above 55%. Our CEP1 is at 14%. So some examples of what we have introduced under Forward 30 in the second quarter and all these are done to really differentiate ourselves versus our peers. First is to make sure that we can capture the opportunities that's arising from the structural shifts in ASEAN. Three main themes that we saw, AI data centers, wealth and cross-model corridors, and we're positioning ourselves within each of these areas to make sure that we can capture all this growth. In fact, the asset load growth that we're seeing, quite a sizable proportion of it is coming from the AI and data center space. We introduce a new private wealth segment to co-exist in between the preferred and private banking segments that we already have and this is really to tap into a customer segment that we haven't Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Hldgs Bhd Ord Something very different compared to what else is on the market today. In most banking apps, you will need to decide yourself what to invest in over the hundreds of products that's available. But on Opto, it's very advisory focused and it's available to everyone. Cross-border corridors, I've mentioned this previously, our commitment in JSSCZ with regards to our 10 billion loan commitment, we are outperforming on that side, a lot of it linked to data centres, as well as our ASEAN financial passport programme. We've announced a number of partnerships and MOUs with regards to China and ASEAN, both with financial institutions. We continue to double down on our very successful Singapore-Malaysia corridor. The most successful product at the moment is our FX proposition. There's a lot of Malaysians working in Singapore. They send money home back every month. We guarantee you best FX rates. As a result, customers open Casa account with us in Singapore and Malaysia. One area that we are double-downing on and we increased the intensity this second quarter, in fact we introduced two new products, is really to increase the leveraging between CIMB platform and Touch and Go platform. This is where CIMB is unique, no other peer in Malaysia. It's both a universal bank as well as the national e-wallet. We have the benefit of both and we are leveraging on both platforms. 2 new services that we introduced this second quarter. First is the ability to invest in gold via the Touch & Go app and this service is provided by CIMB. Secondly is if you're an SME business, you use Touch & Go for collections today, you can then also apply for working capital financing via the Bizcash feature on Touch & Go app. You click on the app, it then directs you to CIMB. Thirdly, this is something we announced yesterday. We believe this is the future of financial markets and this is tokenization. It has been a four-month journey for us. In April, we were advisors to Kazanah, who pioneered tokenized Sukuk issuance in Malaysia. Given that was the first issuance, we started small. We started with $100 million with a few institutional investors who invested via fiat currency. But what we did yesterday, we took it to the next level. We used the CIMB bond to be issued in tokenized format instead. So of the 1.68 billion issuance, 1.38 billion was issued in tokenized format. It was issued to 12 institutional investors and those investors subscribed for our sukuk using a CIMB tokenized deposit. So this is the evolution starting from the Kazana pilot to now the CIMB pilot. We are the first Malaysian bank to do so. But we are double downing on tokenization because we do believe this is the next financial market innovation that will come through over the next coming years and we want to make sure that we are the first to innovate The next step for this really is to move from pilot phase to practical execution. So with that summary, I will now hand it over to Cairo to go through the rest of the presentation. Cairo, over to you.

Thank you, Novan, and good afternoon, everyone. So firstly, what I'll go through is the second quarter key highlights in terms of the financials on slide six. A few key points here that I want to highlight. Firstly, the strong NRI growth that Novan During the second quarter, we also took some conservative view in terms of our overlays, and that has resulted in our credit costs being at 38 basis points during the quarter. If you go to the next slide, on slide 7, on the full half-year basis, the additional overlays that we took during the second quarter, the half-year annualized credit costs is at 34 basis points. The strong NOI growth that continued during the second quarter has translated on a good year-on-year number where the proportion has expanded by 1.3 percentage points. Coupled with the strong total asset growth on a constant currency basis at 6.3% year-on-year, this has mitigated Other highlights that I wanted to share, if you move to slide 8, firstly, just giving more color on that NOI growth. So this is the second quarter where we recorded good sequential growth on NOI. So if you look at the left-hand chart, During the first quarter, NOI sequentially grew by 11.9%. In the second quarter, NOI sequential growth was also strong at 6% QoQ. So this really drove our total income growth of 2.8% coupled with the fact that total asset growth was good at 1.8% QoQ. So this overall mitigated that four basis points margin compression that you see on the line chart at the bottom. We have been saying that FX translation has had a negative impact in terms of growth on our reported number. However, if you look at our underlying performance on a constant currency basis, those time charts are depicting the year-on-year growth of both Operating Income and Net Profit. And both trend lines you can see in terms of our Operating Income has been resilient on a year-on-year growth basis on constant currency hovering around that 4% level. Similarly on Net Profit that has been relatively stable except for the first quarter but overall is still hovering around the 4-5% growth level. On cost, this is where we have exercised very good cost controls where both on a Q&Q and year-on-year basis our cost has come down. Moving on to the next slide, slide 9, this is some of the key highlights from business segments. Firstly, on consumer banking, the strong growth on a QMQ basis is really driven by wealth and also other income, NOI growing by 10% QMQ driving that PBT growth. On a union basis, consumer banking did face some margin pressure, and this is coupled by the absence On wholesale banking, both on a QMQ and year-on-year basis, the growth is mainly driven by robust treasury and market total income growth. However, during this year, we also had some recoveries in Singapore and also Indonesia contributing to that PBT bottom line growth. On commercial banking, QoQ, the absence of an overlay writeback and recovery in the second quarter versus the first quarter resulted in PPT being lower. On a year-on-year basis, debt recovery during the first quarter of 2026 also contributed to the overall half-year growth on a year-on-year basis, coupled with the fact that the client franchise NOI number was stronger for commercial banking year-on-year. On CDA, both on the Q&Q and year-on-year number was impacted by some of the central OPEX that we took during the second quarter which was related to the Thai transformation restructuring and also some of the central expenses Next slide on our country, Malaysia. View on view, the top line growth is strong at 9%. This is however offset by the timing of our products and bookings of overlays. So that moderated the bottom line growth to 1.1%. On a year-on-year basis, similarly, the timing of the overlay write-backs and overlay charts impacting the bottom-line growth. However, if you look at it from a top-line perspective, Malaysia top-line grew by 3.7%, with NRI exceeding that, growing at 4.3%. Singapore QoQ, we did have a legacy recovery coming through during the second quarter driving that PBT growth on a year-on-year basis in addition to that second quarter 2026 recovery. Banker wealth also grew well on a year-on-year basis. Indonesia, overall, we had some challenges in terms of NRI, impacting some of the moderate NRI growth for both Gyeonggyu and Yeonyeo. We did also record lower recoveries, where in the first quarter we recorded a lot more writebacks. Similarly, on the Yeonyeo basis in 2025, there were a bit more writebacks coming through, so the absence of those impacting the bottom-line performance. Thailand QMQ is related mostly to the restructuring cost that we booked during the second quarter. On a year-on-year basis overall, driven by the transformation that we are doing in Thailand, we are seeing better OPEX year-on-year and we are also seeing lower ECL year-on-year driving that stronger PPT performance. On slide 11, breaking the P&L down firstly on NRI. So you can see our NRI growth is good at 1.3% QoQ despite the margin pressure of 4 basis points. If you break down that margin pressure, firstly it's coming from Malaysia, coming down by 6 basis points. And this is mostly driven by higher cost of deposits, predominantly on the wholesale side as we find In Indonesia, on the headline, we are reporting a slight expansion in margin by two basis points. On an underlying basis, we do see some pressure given the competition on FDs and also Thailan Thailan the the Our NRI is mostly due to APEX's translation. The total asset growth has been good. If we all look at it on a constant currency basis, our NRI did grow by 1.7%. Margins did contract by 10 basis points. That's mostly driven by Indonesia because of the backdrop and also the interest rate highs. In Singapore, the significant SORA movement had impacted our names as well. On the other hand, if you look at Thailand, We managed to expand our margins quite decently. In Malaysia, we did see a bit of margin pressure of 3 basis points and this is related to the second quarter movement. I think it's important to highlight for Malaysia, we did get an interest rate cut in July 2025. So the comparatives will start to Just to recap, in 2025, on a full year basis, our margin in Malaysia is at 1.78%. So at the moment, we are just slightly down compared to the full year of 2025 of 1.77%. Moving on to NOI on the next slide, you can see in terms of the driver for the quarter is coming from firstly fees and commission that's mostly coming through from wholesale banking. We are sustaining a good level or high level of wealth and also client sales numbers. Hldgs Bhd Ord Hldgs Bhd Fees and commission is down mainly because of corporate fees being weaker in Singapore. Wealth is mostly driven by Singapore and Malaysia. Trading is flattish, whereas flying sales treasury continues to outpace the trading side, growing by 4.3% year-on-year. I'll give a bit more colour in terms of the other income line. The other income line, last year in 2025, we did in Malaysia of RM100 million. This year in 2026, during the second quarter, we did record a lumpy non-recurring other income in Malaysia of RM100 million. So if you exclude both of that during the two years, there is a slight increase of RM100 million under other income and that's related to mainly two things. One is brokerage income did increase slightly, that's number one. Number two, the foreclosed assets, Operating Expense Hldgs Bhd Ord Hldgs Bhd In terms of our investment, that continues to be the case with our tech CRR being maintained around the 8% level. Moving on to slide 14 on asset quality, from an overall perspective, that remains stable and an underlying number. But if you look at the PNL-Isiang movement, so I'll break this down on segment by segment. If you look at retail, firstly, we did have some overlay right back last quarter. And then during this quarter, we reallocated that overlay Hldgs Bhd Ord Hldgs Bhd Hldgs Bhd Ord Hldgs Bhd On the recoveries, we did record significant recoveries both in Indonesia and Singapore So similarly, on a year-on-year number, retail is predominantly driven by the timing of the overlay. Last year, we had a RM200 million overlay right there. That's number one on the retail side. Number two, if you recall, I did mention that we had a model enhancement and that Hldgs Bhd Ord The increase in recoveries that's related to the second quarter number which is the Indonesia and Singapore. I think most importantly if you look at our gross impact loss ratio on an underlying basis that has continued to slightly improve during the quarter and our allowance coverage is close to the 100% level. On the next slide, slide 15 on total asset growth Apart from loans, debt securities was a major driver and that's mostly coming from Malaysia and Singapore On gross loans, on slide 16 If we break it down by the segments in consumer banking, both QMQ and New Year, that's driven by Malaysia and Singapore. Commercial banking, both QMQ and New Year, we have relatively robust growth in Singapore. It's still fairly moderate during the quarter for Malaysia as what we had seen in the first quarter on commercial banking. Wholesale banking is a big driver. Overall, during the quarter, it's mostly coming through from Indonesia and Thailand, wholesale banking. On the year-on-year basis, that's mostly coming through from Malaysia, going at 8.1% year-on-year. Breaking it down by country, Malaysia, consumer growing at 4.3%, Malaysia wholesale growing at 8.1%, Indonesia, that growth is mostly driven by wholesale banking, whereas consumer is slightly contracting. Singapore, consumer Singapore growing at 14% year-on-year, and commercial banking growing at 11% year-on-year. In Thailand, the headline negative growth is really driven by consumer, offsetting that is wholesale banking. On deposits, on slide 17, growth on CASA continues to be positive at 40 basis points. For the second quarter, commercial banking has done very well across our key operating markets, driving that growth. Similarly, Thailand wholesale banking also driving that growth. Hldgs Bhd Ord Hldgs Bhd Slide 18 Dividends, as what you've already heard, we maintain our payout of 55%, which is equivalent to RM2.1 billion. On slide 19, in terms of our capital and liquidity, debt remains very strong, with our liquidity profile further improving. Now, breaking it down on slide 20 on performance by segment, firstly on consumer. Hldgs Bhd Ord Hldgs Bhd is actually growing by 12% year-on-year. Peace is one component of One Wealth. The second component is the other income that's driving the strong NRI growth, partially offsetting the NRI pressure that we see on a year-on-year basis. And on the bottom line, where on a year-on-year basis it's negative is because of the absence of the ramp-back that we had in terms of overlay and also the model enhancement that was recorded in 2025. On Gross Loans, the bigger driver is Malaysia at 4.3% and also Singapore growing at 14%. KASA Malaysia is driving that growth at 4.3%. Commercial Banking on slide 21. During the quarter, NORI on fees and effects On the PVT number being lower, we did have a right back and also recovery, overlay right back and also recovery during the first quarter. And during the second quarter, we did reallocate some overlay. On a year-on-year basis, the flat-ish growth on operating income is driven by margin compression. NOI is also lower because we had some MPL sale gain in 2025 in the commercial business. But like what I said, in terms of fees and effects, the operating The cross-loans at 3.3%, that's mostly driven by Singapore. Malaysia remains fairly weak at 1% growth year-on-year, a reflection of the environment and also some of the timing of disbursements. On KASA, that strong year-on-year growth is across our key operating markets of Malaysia, Indonesia, Singapore and Singapore. Side 22, on wholesale banking, Hldgs Bhd Ord Hldgs Bhd Cross Loans, mostly driven by Malaysia at 8.1% Indonesia during the second quarter was also strong Kasa Growth, mostly driven by Malaysia, growing by 13% year on year CDA and Group Funding on slide 23, those central costs that I mentioned related to the transformation costs in Thailand and also some of the central costs in terms of provisioning on costs on OPEX, you can see that has translated to the 25% Hldgs Bhd Ord Hldgs Bhd Ord So lastly on Islamic on slide 24, the operating income growth is mostly driven by NOII. A lot of the overlays being done at Islamic impacting the bottom line growth. You can see both on a Q and Q and year on year basis. Financing continues to be good, mostly driven by Malaysia consumer. A lot of the FDs or term investment account here that may be of 9.2% per year. So with that, that's the end of the financials. Thank you, and I pass the presentation back to Nobret.

Thank you very much, Cairo. So with that, we maintain our 2026 guidance that we have provided earlier this year. And that's really on the back of our Forward 30 execution being firmly on track. In fact, we are seeing all the benefits Group Hldgs Bhd Ord We are always looking out at our underperforming businesses, businesses that will struggle to scale, and we are taking decisive action. For example, we divested out of the Thailand auto business that is on track to be completed in a few months. That capital will then come back and will be re-advocated into other closed areas. If there is excess, post us evaluating our business like how we have proven in the past, that excess could go back to shareholders. But the priority will always be on us reinvesting for growth. One area that we have really focused on over the last few months is really to double down on our unique digital Touch & Go Group is really outperforming since they broke even not too long ago. The next two C's on cash and cross-sell, these are areas that we continue to have a lot of relentless focus. On the cash side, we have our Octo consumer app, OctoBase app for businesses and Touch & Go. All our consumer-facing apps are already next-generation ready. And the simplified journeys, the easy-to-use are all contributing towards to increase in our cash franchise. The focus on cross-sell, a lot of it has been on the wealth areas, a lot of it has been on the wholesale advisory areas, a lot of it has been also coming from our cross border flows. FX through the treasury client sales has been a big contributor and this has allowed us to capture the growth opportunities that we see across ASEAN at the moment. And then the fourth C of capabilities. This is all about becoming simpler, better, faster. And this is something that we're very obsessed about. We're starting to see it in the numbers. We're able to extract value from it. OPEX is declining. And that includes a lot of one-off transformation costs in there at the moment. But as all these one-off transformation costs roll off, we can expect to see OPEX declining further. And then lastly, this is with regards to the 2 billion capital return plan that we announced in November last year. We started with 700 billion, we have 1.3 billion gold. We are committed to execute on this plan supported by our current strong capital position. So with that, that is the end of our presentation and look forward to your questions. Thank you.

Thank you, Noban and Khairul. We will now begin the Q&A session. Just a reminder, if you would like to ask a question, please use the raise hand function and we will unmute your line. We have a few raise hands here. The first one comes from Peter Kong from Penang. Peter, are you there?

Hi, good afternoon CIMB team. Perhaps just let me start with two questions. The first one is a little bit more housekeeping. I attended the recent NYAGA briefing and there was a reduced guidance in terms of the concern on credit costs and there was a very specific reason for the credit cost increase. which was relating to a OJ car ruling on some of the vehicles we possess previously treated as inventory that now needs to be treated as a loan and if this inventory vintage was more than 180 days then it becomes impaired etc etc I was just wondering when it comes to the group level how much has this change in accounting rule effect Hldgs Bhd Ord I would say that the environment that we are in today, we do see some of the banks that have reported before you strike a bit of a more cautious tone with regards to NIM going forward. And I note that one of your slides on liquidity coverage ratios, especially for CIMB Bank, CIMB Islamic locally, they seem to be still on an increasing trend. We see some of your other competitors have already started to allow their LCRs to come off a bit. So I was just wondering why is there such a divergence and is there scope for you to maybe optimize this as well as you go ahead if the environment gets a little bit more challenging. So those are my two questions. Thank you.

Okay, no thank you Peter. On your first question with regards to the new OJK rulings on multi-finance companies. So yes you're right, it is a timing issue and it hits different parts of the P&L. What used to hit us at the NOII line post the sale of the vehicle now instead will hit us at the ECL line so it's different parts of the P&L but it's a timing difference nonetheless we will increase the ECL line for Indonesia but given we are a large diversified group of course there are other areas that are doing better and therefore our overall group guidance for credit costs will remain But you are right, Indonesia specifically, there will be an impact because of the changing of the impact of the P&L lines. But it is a timing issue.

So just to add in terms of the number itself, during the second quarter, so we do of course take it directly to the group. So for the second quarter, the number that impacted at retail is in the second quarter. And like what Novan said, we are a diversified group and from an overall perspective, our credit charge guidance has been maintained at 25 to 35 basis points. We are getting, in and during the second quarter, good recoveries coming through from Singapore. So that has offset some of that downgrade in guidance, if you want to say, in Indonesia, in terms of that credit cost guidance. The second one in terms of our LCR, there are many components to managing our liquidity. I think from an overall NIM perspective, you look at our that has improved during the second quarter and this is funding our total assets growth during the quarter and also you know given the pipeline that we are seeing for the third quarter and we have built up some of the wholesale funding side which is positive because on the LDR wholesale funding is part of the LDR on LCR as well wholesale funding is part of that However, we do manage our liquidity also on an NSFR basis which we don't disclose and most banks do not disclose their NSFR. So we are still very optimal in terms of our NSFR. It is stable, it's not declining or improving. So that's another area of consideration when we manage our liquidity. So in terms of the optimal level of liquidity, we are maintaining that optimal level and we will continue to do so and that's where Deposits and also KASA from an overall perspective.

But on your question on the NIM, I saw the various results on the street also. Results are mixed. I hear you on the NIM cautious tone. I mean we are also I guess cautious. I mean our NIM for Malaysia declined 3 basis points for the first half. Hldgs Bhd Ord Hldgs Bhd going out there to win cash without rates, and it's not easy, but it's something that the entire Troup is all relentless and focused on, which is why I think we've managed the name compression well. But yeah, having said that, look, I think this is something that we continue to be vigilant and we want to continue to defend and Thank you for taking my question.

I hope you can hear me.

Thanks for taking my question.

The first one is this in provisions. So apart from that 60 million provisions for the retail sector that you said was because of Indonesia regulations, I think there was other included well in the provisions, right, for other sectors, including retail. So I'm just wondering if there's any underlying deterioration that you're seeing. And, you know, provisions overall are running very close to the top end of your guidance. If this sort of credit quality deterioration continues, is there a risk that we might miss the guidance for the full year? That would be my first question.

So I think where we have been conservative is in terms of our reallocation of overlays. So it's the timing of that reallocation. So if you look at first quarter, we did have some write-backs both coming through on the retail side and also the non-retail side. So the pick-up that we see on a queue-on-queue basis, number one is the one that we discussed in terms of that OJ car change in treatment. But predominantly, the major driver is really our overlays. And that is pre-emptive. So to your question, if we do see, so for now, our underlying asset quality has remained, from a broad perspective, stable. We do have that overlays that we have already booked during the second quarter. If we do face any any iteration in certain segments of the asset quality. So both on retail and non-retail, we've put aside those overlays related to any inflationary pressure coming through from the macro backdrop, coming through on the uncertainties from the Middle Eastern prices. And that's where if there is any iteration, but for now we're not seeing any, this will provide us that buffer to take on that iteration of asset quality.

Okay, thank you.

Second question is on the net interest margin. So just based on your current view on the deposit competition, when do you expect the Malaysian in to trough? Or do you think this compression and then continues for the next one to two quarters?

Overall, I think just to be clear in terms of the view on NIMH and LCR, I think we are looking on a four-year basis at the group. We do look at margins year-on-year to be flat to minus 10%. As at half year, we are already seeing the 10 basis points margin contraction being translated. We do have some levers to mitigate any further pressure coming through in Malaysia and those levers are two-pronged. One is in terms of the FDs. We do want to ramp up a bit on our FDs because we have raised a bit more of the expensive wholesale funding. If we manage to optimize that in the coming quarters, KASA So these are some of the levers that is in execution to hopefully give that stabilization of NIMS. The competitive environment is still very dynamic both on the wholesale funding side and also on the retail side. But our expectation is that there could be some small pressure coming through a few basis points but we are relatively of the second quarter numbers with the execution of FDs and Customs.

Okay, understood. Thank you. And third question is on wealth. So wealth has been a key growth driver for yourself. And in this particular quarter, we saw a good level of strength for you and for the sector in general. I'm just trying to understand how much of this do you think is market related versus how much of this is really sustainable, structural, Genuine inflow that is happening. Any thoughts on that would be very helpful.

Thank you. Big picture, certainly, I think Asia is seeing some level of inflows. The disruptions that we're seeing in the Middle East, some diversifying away from Hldgs Bhd Ord Hldgs Bhd Of course, there are winners and losers within ASEAN. And at the moment, I think the two big markets that is getting a lot of inflow is, number one, Singapore, where we do have a strong presence as a challenger bank. And secondly, also, to some extent, Malaysia. So we are seeing, macro-wise, some inflow, And then whether it is sustainable or not, then that depends on the strength of the franchise. And that is where CIMB is different compared to a lot of our peers in the region. CIB is always known as a strong wholesale bank. Wholesale bank is our specialty. We bank all the top issuers in the region and we advise the top issuers in terms of issuances of, for example, capital market instruments. We package all these instruments ourselves into wealth products that can get distributed Hldgs Bhd Ord Hldgs Bhd you know, manufacture and package the products ourselves. So that is one key difference between CIMB and our peers and I'm a big believer in that and I'm confident in fact that this is what differentiates us versus everyone else. So number one, there's been inflow. Number two, to keep the inflow, you need the products, you need the franchise and that is where we are differentiated versus the rest. And then our locations, right, of Malaysia, Singapore, We leverage a lot on the Malaysia-Singapore corridor. We leverage a lot on the Indonesia-Singapore corridor. That is another part of our endowment that differentiates us. So this is one part of the business that, you know, we are, I mean, this is a key pillar for us under Forward 30. It's a key pillar under our third C of cross-sell and the second C of cash and is a big focus for us. And that's why we introduced a new segment called private wealth about a month ago because we're banking the preferred banking well, we're banking the private banking well, but then we then realised that there is a category in the middle that is also very large and probably less tapped and we are playing in that segment now.

Great, thank you. Very clear. Last question, if you could share your latest thinking on capital allocation, specifically with regards to Nyaga and TNG Digital.

So, first, we are always on the lookout of underperforming businesses or businesses that will struggle to scale and win over the next few years. And we demonstrated that first with Thai Auto. We are evaluating options for other areas as well. And at the right timing, of course, we'll make the necessary announcements. But using Thai Auto as an example, we are down to complete that in a few months. We'll then go through the process of repatriating the capital back to Group. That capital then needs to be reallocated to other growth areas. And that is what we are evaluating right now. We have identified some of the areas that we know we can win, and we'll make the necessary announcements at the appropriate time. And then, once we've exhausted that and there's still excess capital, as we have proven in the past, we will then consider to return that to shareholders, but only after going through that thought process. Touch and Go, that is something very special that CIMB has in our platform, compared to any of our peers. Everyone is a universal bank, we have their digital offerings. We have our universal bank and digital offerings together with Touch and Go. and Touch & Go serves 2 out of 3 Malaysians. It is the dominant e-wallet in the country. That is performing very well. In fact, it is outperforming beyond what we have projected for since it broke even not too long ago. As Khairul mentioned, year on year, growth in profit is more than 100% in the first half. It hit 90 million profit.

We are seeing a very strong trajectory there. That's certainly an area that, as I mentioned earlier, we're going to double down further to leverage the strengths of our Universal Bank Platform and the Touch & Go Platform.

With regards to Niaga, Niaga is an important part of the business. It is facing headwinds and challenges today, both on the macro front as well as FX when we convert the Niaga results back to Group. But look, at the end of the day, we are in Indonesia for the long term. There are short-term challenges today. What's most important is we remain close to our customers. We make sure that we bank the right customer segments within Indonesia. And we make sure that we grow responsibly, we grow safely. That is basically the focus for Niaga.

Okay, thanks very much. That's all my questions.

Thanks, Akash.

Can we move the line to Jin Han of Arcade, please?

Hi Novan, hi Cairo, hi Steven and team. A few questions from me. The first question would be, there's a lot of noise in the loan loss charge up to first half. Would it be possible to actually deconstruct their credit costs on an underlying basis, so excluding any kind of overlay, write-backs or reclassifications? What would the underlying credit costs actually look like? And looking at the December balance of about $984 million in overlays at the time, I think this is accounting, how far away is the current base from that level?

Yeah, so I think in terms of the debt charge, because there is a debt copulate charge, I think if you exclude the noises, right, and if you also exclude the significant recoveries from Indonesia and also Singapore, from a credit cost perspective, it is very stable, queue on queue. Okay, got it.

Got it. And how far is the current overlays from that 984 December number currently?

We made a net addition to the December number.

Okay, got it. Second question would be, I mean, do note the new guidance of of flat to minus 10 please do correct me if I'm wrong but I think previously it was minus 5 to plus 5 so I mean with this relatively new target in mind where does net interest income point to in terms of that growth are we still looking at maybe a mid single digit kind of contraction including FX or do you think it could actually get better

The offset is coming from two parts. One is the total Hldgs Bhd Ord Number 2, our NOI growth has also been good on the wealth side and the try and franchise side. So if you look at our NOI growth for the year versus our earlier expectation, this has also been good where the second quarter trading number, even though down, is still very well supported at a decent level. So that is where the offsets are coming through from our guidance of NIMH coming off. The guidance that Novan highlighted has been constant versus last quarter.

Got it, got it. Sorry, just bear with me one last question in terms of the wealth income because I think the chart is actually relatively new. We'd like to understand a little bit in terms of what the splits look like between the various kinds of primary products. So things like banka, unit trust, structured products, a little bit more colour into what actually provides more contribution and what provides less would be great.

Yeah, good question. We do have those numbers, but we are displaying or disclosing this in phases. So as what you rightly pointed out, those are the main components of that wealth number. As and when we start getting further captured and we can talk about some of our plans in those certain areas, we will start disclosing a bit more in terms of the breakdown of that wealth Group Hldgs Bhd Ord

Free Float Requirement in Indonesia

Bit of a tough one to deal with right now. How are you thinking about it? Can you get exemption? And if not, what are the possible options there? Thank you.

We are exploring all options hush. So at the moment, we are exploring how it could be like if there was a capital market trade, but not a typical type of capital market private placement where you place at a discount at the current price, which is illiquid, but more You know, a re-IPO type of trade where it's based on our ROE as opposed to based on the current trading price which is not reflective of the fundamentals of the business. So that is one. We are also speaking to the regulators with regards to what do we then discover during this exercise. So we are exploring all options.

and we've been doing that for quite some time now since the announcement of the rules came out Right, so basically a long long time ago PMB was able to place I want to say add a premium to one of the Japanese banks so something on those lines are based on underlying profitability if there is a strategic investor who comes in and buys but it It's tough to... Strategic investor won't be free for it, right? So, basically you have to sell above current price for you to get a fair value. But that seems very tough. So, the only hope is regulators agrees that it is very tough to do it in a commercial manner that gives exemption. But if they don't, then it's a really tough choices to increase PTOD in either way, right?

Yeah, I don't see it that way, Harsh, because it could be a placement to a few institutional investors, or if you want to call it strategic, right, and still satisfy the free flow definition. So it could also take that form harsh, but more importantly is we need to explore all options and we then need to assess it and we will be discussing with the regulator with regards to the best option to take.

Thank you.

We have no other questions at the moment. Just a reminder to everyone, if you have a question, please raise your hand.

Use the raise hand function.

Sorry, if there are no questions, can I take one more? Sure. More on the operations side of it. It seems Nyaga numbers are fine, group numbers. There seems to be a very significant shift in the way deposits are raised or funding is raised in Malaysia. So could you talk both in Indonesia and in Malaysia, how is the overall funding environment shifting? Because in Malaysia, we have moved to loan to funding, people looking more at LCR, NSFR rather than DNM focused on LDR. So Cliborne has moved up beyond the rate expectation. Indonesia, we know the funding situation is tight. So in both of these markets, over the next six months, should we expect overall cost of funds to go up or not really? And what are the drivers of funding in particular and a bit more granularity as to how you're thinking about these two? Thank you.

From a sector perspective, we go country by country. So in Indonesia, I think the competition still remains very stiff and liquidity still remains tight. We continue to have having to increase in terms of our MD rates to continue to get those volumes coming through. So from a headline perspective, yes, there is that headwind coming through, but we have two levers in Indonesia. Well, three levers. One, fundamentally, our CASA growth in Indonesia has been good and we continue to double down that fundamental strategy of Group Hldgs Bhd We will manage to optimize the cost of our liabilities overall. So that is the plan. Thirdly, what we haven't executed fully is the repricing up of loans. We have done that a bit during the second quarter and towards the beginning of the third quarter, but there is still a lot of opportunity to do so. But that is, of course, subject to the competitors. Hldgs Bhd Ord Hldgs Bhd Ord Funding, there is some competition on the wholesale funding side. So that's where there will be a creep up in terms of the rates and that's where the offset is us ramping up on the retail MD in the second half. So we've grown that very well in the second quarter. We're going to continue growing the retail MDs and that's where the opportunity to offset some of that headwind where we are able to Attract some of that wholesale funding that we built up in the second quarter. So that is the plan to offset some of the in Malaysia.

Singapore is a branch for Malaysia and Singapore has seen a lot of deposits due to the fact that it's a very liquid market. So that is also another lever for us to raise deposits. We've also been raising deposits out of Hong Kong. Hldgs Bhd Ord The point on Malaysia is there is liquidity. The question is price and therefore it goes down to deposit type. And that's why it's retail, KASA and FD that is crucial together with commercial. And those are the areas that we are double downing on in the second half.

Nice. And if I could just understand, what does that mean for half on half? Do you think We can improve from here.

Yeah, I think with the execution of those offsets, both in Indonesia and Indonesia, I think we can, we are targeting for half and half or sequential names to be relatively stable.

If I may, one last question, any trends in asset quality and overall So in terms of asset quality, there is nothing sporadic that is causing it to be flashing ever.

There are certain one-off cases, very specific cases that we are dealing with, which is what you would already see in the current asset quality numbers. There are also previous products that we were growing in the previous years that you would see heightened asset quality numbers in the current numbers, which we have already stocked. So, for example, FinTech Lending, which we actually used to grow in Indonesia quite a bit, we have stopped that at the start of this year. But we are seeing the remnants of the ECL in the numbers today, but that will basically end soon. So, if you're asking about something widespread, specific, one of the cases here and there, Yes, doesn't form a trend. And for certain products that we know of the deteriorating asset quality, which is already reflected in ECL, we have stopped them. So that is where we are today.

Thank you. Thanks, Ash. I think we can take the last question from Rahul. Rahul Jain from MFS in Singapore. Rahul, are you there?

Yeah, thanks. Good evening, gentlemen. Thanks for the presentation and announcing some good questions. I just had two follow ons. First is coming back to the margins discussion. So last quarter, I thought you were sounding a lot more confident in managing margins, but this quarter, the guidance has changed. But at the same time, the growth guidance has been stronger. So just trying to understand What are the underlying dynamics that are playing out? We did see with some other banks also where the growth has been stronger, but the compromise has been on the margins. So is it to take away that banks are compromising a little bit on the margin side to fund the growth? But technically speaking, if the growth dynamics are stronger, you should be able to price up these loans if there is a demand side challenges. So that's question number one. And I have one more small question after this I'll ask. Thank you.

The biggest change, Rahul, from when we did the first quarter to now is Indonesia. During a very short period from May to June, there was a 100 basis points high in interest rates. Some of it was not expected by the market, but BI did it to defend the rupiah. So that then led to some distortions or disruptions in how banks have been planning funding. So that is one disruption and one change from the previous discussion we had where we're seeing NIMS bottoming out to where it is today. and you are right to mitigate that is to then pass on the increase in interest rates into the loans because the deposits hit you straight away but the loans will take some time for us to pass it through especially on the wholesale side so that is something ongoing we've already started passing through some but there's still some way to go for us to pass through those rates so I mean Indonesia has been has been one key area. I mean, other markets like Malaysia has been pretty stable for us. I mean, year on year we had three basis points compression when the policy rate went down by 25 basis points. So I think Malaysia in terms of our funding strategy to fund our asset growth has been sound, although we do have areas that we want to optimize further and we do see opportunity for that. Thailand, on the other hand, despite, you know, having a lot of rate cuts, you know, we've managed to increase the names, as you can see on page 11. So, it's, I mean, the main difference was Indonesia, but that is timing, as you said, and it's down to execution of us passing through those loans.

Got it, thanks. And just to follow on to this point, so, if the rates were to go off further in the other parts of ASEAN, Would we witness some more compression? Is that already priced into your commentary when you say the margins are going to be relatively stable in 2H? And if it is, then would it be the later part of the 2H or from now itself?

You should be able to do that as a news fellow. I've taken into account the rate outlook in terms of our guidance for the year 2026. I think the biggest driver, of course Indonesia being one, but Malaysia, we are expecting rates to be stable. If we do get a rate hike in Malaysia, it's actually positive. It will be positive to the tune of 80 to 100 million ringgit on an annualized basis.

Got it, got it

The other question I had was on the capital allocation. So you did a good job in Thailand, but let's say if I take a three years view, can you just quickly refresh how the RWM mix could look like, how the PBD mix could look like? There's been some good progress on the fee income side as well. So capital allocation and the PBD breakup, the next three years, how would it look like to the investors? Thank you.

So we are actively evaluating underperforming businesses. It could be countries, it could be segments within countries like what we've done in Thailand. And we are evaluating how that could look like in the next few years. We are and will be considering those options. So very difficult for me to give you a sense of that breakdown now because we do anticipate changes in the portfolio over the next three years and that changes will then lead to differences in capital allocation. I think the takeaway here is will there be further changes to the portfolio and how it gets allocated? The answer is yes. Where will it be? I'm not in a position to disclose at the moment.

Got it, but just to reconfirm, that will be ROE accretive, I suppose.

Yes, we are evaluating areas that are ROE destructive, and we are seeing if there's a chance for it to be ROE accretive. If it cannot, and it cannot be scaled also, then like what we did with Tai Oto, that will be the action that we will take. It will be decisive. So there won't be changes. I'm just not in a position to tell you where are the changes right now. If you look into our portfolio deeply enough, you probably could get a sense. But I'm not going to disclose that at the moment. I'm not in a position to be able to disclose that.

No worries. Very helpful. Thank you so much and good luck for the future quarters.

Okay, thank you Rahul.

And that's the last question for the day. I would like to pass the line back to Novan for his closing remarks.

So thank you very much everyone for joining us on a Friday afternoon. Fellow Malaysians, I would like to wish everyone Selamat Hari Merdeka. Enjoy the long weekend with your family. And I look forward to meeting all of you soon in our future engagements. Thank you.

Ladies and gentlemen, that concludes our briefing for today. Once again, thank you for joining us. We wish you a very good evening ahead.