Good afternoon, ladies and gentlemen, and welcome to CIMB Group's financial results briefing for the fourth quarter of 2025. Our host is CIMB Group CEO, Novan Amirudin, and Group CSO, Khairul Rifaie. My name is Steven from the CIMB IR team. You should have received the analyst presentation and financial statements by now from the investor relations email. Otherwise, you may find the documents in the IR section of our website at www.cimb.com. Before we begin, please be informed that this briefing is being recorded.
I would like to encourage everyone to include your name and company on the Teams app to allow us to identify you. Note that all participants' lines 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 Novan and Khairul.
Novan, over to you.
Thank you very much, Steven. Thank you very much all for joining our presentation this afternoon. It's been a very resilient year, despite all the challenges that we saw on the FX side, given the ringgit appreciated vis-à-vis other ASEAN currencies, the persistent rate cuts that we saw in all markets that we operate, as well as the various macroeconomic headwinds. We completed 2025, which is the first year of our Forward30 execution, by delivering record net profit of MYR 7.9 billion, which translated to an 11.3% ROE.
I will now go into the drivers behind this record performance. First and foremost, our non-interest income, NII, if you focus on the table on the left-hand side, the NII has two components. One is our NIMs, and secondly is our asset growth. The first point, NII, was flat despite all the persistent rate cuts, and we attribute this to our successful cash strategy which focused on reducing our cost of funds, which then cushioned our NIM compression to 8 basis points year- on- year. Alongside that, assets then grew for us on a constant currency basis by 6.1%.
These two factors basically assisted in our flat NIM, despite the persistent rate cuts. NOII saw a year of growth. Year- on- year, it grew 3.1%, but the main call-out here is our client franchise business derived from NOII, which grew 4.8% faster than the growth in NII. This is a testament to our successful cross-sell strategy, which focused on client franchise business as opposed to just trading income. Moving on to our operating expenses. Thanks to our capability strategy, this led to disciplined cost control, and our cost-to-income ratio at 47.3%.
As you can see, OpEx grew 2% year-on-year with a flat personnel cost. We continue investments in technology. We invested MYR 1.7 billion in 2025, which is about 7.8% of our income, which is within the guidance of 8%-9% that I provided earlier in the year. With regards to asset quality, this is the best ever GIL that CIMB Group has achieved. Our GIL improved from 2.1% last year to 1.7%. Our current cost remains stable at about 30 basis points, and our coverage ratio remained above 100%, closing at 103.2%.
All this contributed to our net profit growth on a constant currency basis of about 5.3%. We grew from MYR 7.7 billion to MYR 7.9 billion. With regards to capital, we've optimized CET1 to 14.3%. As a result of the record financial performance, we decided to share our record performance with our shareholders also via a record dividend payout. We paid out MYR 0.471. If you recall, in the last quarter, we were the first Malaysian company to announce a MYR 2 billion capital return program. This MYR 0.471 include the first tranche of that.
With all those drivers coming together, that gave us an ROE of 11.3%, which is 10 basis points higher than the 11.2% we achieved last year. If we look at 2025 in review, based on all the guidance that we provided to you at the start of the year, we have largely met all our guidance. Cost-income ratio was very close. We guided less than 47%. We achieved 47.3% from that 2% increase in OpEx. A recap of our Forward30 strategy, which is our six-year plan until 2030. This anchors on our purpose of advancing customers and society.
How are we executing Forward30 is what I like to call the 4 Cs. The first C is capital, and this is important for us to always look at how to reallocate capital to grow. The second C is cash, about building a very strong deposits franchise business to optimize our cost of funds. Our third C is cross-sell, and this is to increase returns and increase ROE. Our fourth C is capabilities. Capabilities is all about becoming simpler, better, faster in the group. How do we perform on each of the 4 Cs throughout the year, which led to our strong financial performance?
The first C on capital, you look at the table on the top left-hand side. Given the challenges that we saw excuse me, in Indonesia and Thailand last year, we reallocated more capital towards Malaysia, which was a lot more stable and saw a lot more tailwinds relative to the other ASEAN markets. RWA allocation to Malaysia increased to 56%, therefore, profit before tax also increased to 61% with a stronger ROE of 12.1% for Malaysia. Correspondingly, you would see that the RWA allocation in Indonesia and Thailand reduced, which then also led to a reduction in the PBT contribution to the overall group.
Singapore remained a very strong market for us, 18% ROE in 2025, we maintain our RWA allocation there with a slightly higher contribution in profit before tax. I've always mentioned Thailand as a market that we are restructuring. That work is ongoing. It's seeing a lot of progress. We will be updating you about our Thailand progress in the not-too-distant future. Sharing our strong performance is our key stakeholders. As I mentioned earlier, this is the year where we've paid the highest dividend amount of MYR 0.471, and you can see on the table on the bottom left-hand side how that has grown over time.
We announced our MYR 2 billion capital return program until the end of 2027. All permanent workforce in Malaysia are earning above the Malaysian living wage. We committed earlier this year, MYR 200 million investment in the communities that we serve until 2030. This is 30% higher than our commitment in the previous cycle. The second C on cash, as a result of the focus on deposits and the focus on building a strong deposits franchise, we saw a reduction in our cost of funds by 21 basis points year-on-year, coming from a 5.4% increase in deposits on a constant currency basis, which improved our loan-to-deposit ratio.
This helped cushion the persistent rate cuts that we saw in all markets. NIM compressed by about 8 basis points year-on-year. What is encouraging is what we saw in the Q4 last year, which we are continuing to see in January this year, where the NIM compression is now starting to bottom out, as you can see on the chart on the right-hand side. We always believe that to build a strong cash franchise, it is a by-product of having very good cash management services and offerings to our customers.
In the Q3 2025, we launched the CIMB OCTO Biz app for non-retail businesses. This is the CIMB OCTO equivalent but for businesses. With the launch of CIMB OCTO Biz, all our front-end customer-facing applications, whether it is Touch 'n Go, CIMB OCTO or CIMB OCTO Biz, are now all next-generation ready. We also work with the government. We've invested in the BUDI95 program towards the Q3 last year. We were involved from the front-end side via Touch 'n Go, all the way to the back-end side, where we invested in the system that tracks the fuel subsidies that are given to each Malaysian.
We also manage the cash management side from the government to the petrol companies. In December last year, we also announced our blockchain ambitions. We have committed that our next CIMB bond offering will be in tokenized format. We've been admitted into the Bank Negara Malaysia Digital Asset Innovation Hub with regards to blockchain. Just a few days ago, we announced our partnership with one of our key partners, NU Financial, with regards to participating in their digital platform for cash management and the treasury solutions.
Our third C, cross-sell, this is something that you saw the growth in the client franchise outgrowing our growth in NOI last year. We remain as the number one investment banking house, whether on the bond side as well as investment banking as a whole across Malaysia, Indonesia, Singapore, and Thailand with respect to deal volume advice to our clients. Our fees and commission grew 3.2% year-on-year. Our treasury client sales, which is the business that we generate from our customers on the treasury side, grew 7.2% year-on-year.
Wealth grew 9.2% on the back of a 3% increase in our wealth customers. Our fourth C, which is capabilities, there is a relentless focus in CIMB Group to become simpler, better, and faster. This is contributing to what you are seeing in the table at the bottom, where operating expenses have remained relatively flat at a 2% growth, coming from a flat personnel cost over income, but still continued investments in technology, which was within our guidance. We are focusing on our getting simpler, better, faster by setting up the SBF lab within CIMB Group.
This is where we encourage all businesses and enablers to come up with processes to improve your processes further. If something used to take 12 steps, why not six? If something that used to have six signatures, why not two? Last year, we saw 30 over projects coming up from a bottom-up basis from the relevant businesses to our SBF lab to make things simpler, better, and faster.
We also invested MYR 100 million in upskilling our people when it comes to AI last year, there's increasing usage of AI throughout our organization, whether it's coming from transaction monitoring, whether it's coming from client onboarding, and more recently, into our front-end customers, providing them with the tools and data to serve our customers better. With that, I'll now hand it over to Khairul to go through his observations. Khairul, over to you.
Thank you, Novan, good afternoon, everyone. I'll go straight into the numbers with first slide nine. We've gone through this, but I'll provide a bit more color on these numbers on slide 10. Firstly, if you look at our underlying performance that has been robust, we had a seasonally weaker 4Q 2025, typically in the fourth quarter. As you can see on a constant currency basis, if you compare this quarter to last year's fourth quarter, on a constant currency basis, our total income grew by 3.8% with our net profit growing at 8.3%.
Similarly, the underlying robust performance was recorded on a year-on-year basis. If you look at total income, that grew by 4.2% with net profit growing at 5.2%. Like what Novan mentioned, our NIMs are bottoming out and is providing a lot of stability. The year-on-year contraction of eight basis points as well, within our guidance of contraction. If you look at the Q-on-Q performance, that's underpinned by Malaysia NIMs expanding by four basis points Q-on-Q, after the contraction that we had during the third quarter of five basis points, given during that period of third quarter of the policy rate cut.
On our expenses, you can see what Novan mentioned in terms of it being well contained, growing only at 2% year-on-year. If you look at it from a historical perspective as well, that has only grown by 3.1% on a four-year CAGR basis. That cost control has been ongoing and will continue going forward. On the next slide, if I break it down further to some of the business segments on PBT. Just very briefly before we go into the business segment P&L later on consumer banking, the year-on-year performance was slightly down a percentage.
Underlying that, if you look at NOI, that grew well at 14%, but this was offset by the prior year, where we had a slightly higher overlay write-back in 2024. On a quarter-over-quarter basis, that is down because in the third quarter, we had some lumpy NPL sale in Malaysia. On wholesale banking, we had a very strong year, especially on T&M, driving that year-on-year growth. In addition to that, we had some higher write-back coming through in Malaysia. Quarter-over-quarter, there was a very exceptional third quarter performance on trading, so normalization of that impacted the PBT on a quarter-over-quarter basis.
In addition to that, if you recall, we had quite a sizable recovery coming through in Malaysia on the oil and gas sector in the third quarter. We did have a similar write-back in the fourth quarter in Indonesia, but that was smaller compared to the Malaysia write-back in the third quarter. On commercial banking, we did some preemptive macro overlays, so that impacted the year-on-year performance in addition to some NIM compression coming through. Q-on-Q, that was relatively flat with strong NOI being offset by higher costs.
CDA and group funding are slightly lower on a year-on-year basis. This is coming from higher OpEx and also slightly higher provisioning from Philippines. Within that, Touch 'n' Go Digital has recorded a strong, profitable trajectory coming from a small base. Quarter-over-quarter, OpEx accruals that we recorded in the third quarter, and the absence of that or the normalization of that in the fourth quarter has driven the PBT growth. Moving on to the country performance. If you look at on slide 12, very good, strong year-on-year profit growth in Malaysia.
That is driven by NII growth with stable NIMs year-on-year with asset growth coming through. Quarter-over-quarter, it is slightly down, a normalization of the trading and FX, and also we had the lumpy NPL sale coming through in Malaysia in the third quarter, which was not repeated in the fourth quarter. Singapore top line was driving that good growth on PBT with the top line growing at 6.9%, both on NOI and also NII. In the fourth quarter, however, we had lower provisions driving that strong growth in terms of PBT.
Indonesia overall, it was challenging from a macro perspective, that impacted our NIMs in the first half, which, of course, impacted our year-on-year growth on PBT. On the fourth quarter, we had lower NOI coming from the normalization of the trading and effects from a very exceptional third quarter, in addition to the absence of an NPL sale which we recorded during the third quarter. Thailand, somewhat similar to Indonesia, where the backdrop was challenging, growth was weak, and also we had some NIM pressure from the persistent rate cut in Thailand, that impacted our PBT performance on a year-on-year basis.
Q-on-Q, we also recorded a lower NOI compared to the third quarter. On slide 13, breakdown of our P&L for NII. Overall, we had a very good quarterly NII momentum sequentially. You can see on a constant currency basis, we grew well close to 4% Q-on-Q, and that's driven by that NIM expansion, in particular, coming through from Malaysia. Two drivers are coming through from Malaysia on that NIM expansion. Number one, the first point, despite us having that typical seasonal pressure on rates, both on retail and also wholesale, this is more than offset by our deposit rates coming from the policy rate cut from the third quarter.
The full impact of that positive impact in the fourth quarter helped us drive that NIM expansion Q-on-Q. Similarly, in Thailand and Singapore as well, that NIM expansion is really about how we managed to optimize our lower cost of funds. Indonesia, on the other hand, recorded a NIM contraction. We had some lumpy income coming through during the third quarter. In addition to that, we had a 75 basis points policy rate cut in the third quarter. The full negative impact of that coming through in the fourth quarter.
On a year-on-year basis, on constant currency, NII grew by 3.2%. If you look at the NIM contraction, it's really driven mainly by two countries, which is Indonesia and also Thailand. Indonesia contracted NIMs by 12 basis points, and this is given the very tight liquidity and competitive environment in the first half of the year that slowly improved during the second half. The liquidity environment in the fourth quarter was good, we did see that liquidity improvement coming through.
However, because of the tough first half, that drove the NIM contraction and also all the policy rate cuts that we had in Indonesia. That is similar as well to Thailand. Also, in Singapore, where we had a NIM contraction of 18 basis points, where SORA moved by about 160, 170 basis points down throughout the year. Malaysia is positive. That flat NIM is positive given where the rate cut came through in July. This is through the active balance sheet and liability management on both rate and also balances.
We managed to reduce our expensive wholesale funding by about MYR 5 million compared to the start of the year. Moving on to NOI on slide 14. 4Q is really a normalization of what was a really exceptional third quarter. You can see the top left graph, where there is a normalization on, firstly, on fee income and others. We had a couple of NPSL coming through in Malaysia and also the ARC in the third quarter, which wasn't repeated. That amounted to about MYR 170 million in the third quarter, which was not repeated in the fourth quarter.
Trading was also very strong in the third quarter, you can see compared to on the right-hand side, the client franchise drop is not as significant as the drop in trading, which dropped by 48% Q-on-Q. On a year-on-year basis, both trading and FX and also fee and other income grew more or less at the same level. At the fees side, Singapore bancassurance really driving the fees. NPL sale on a year-on-year basis was relatively flat, at about MYR 170 million, that was relatively flattish.
Trading and FX, like what Novan mentioned, is really driven by the client franchise business growing. Client franchise sales are growing at 7.2% year-on-year. On slide fifteen, operating expenses. Like what I said earlier, this remains well under control. The quarterly movement is mainly due to the seasonal impact, firstly on personnel costs. If you recall, we accrued a larger bonus during the third quarter because of the strong top-line performance during the third quarter. The movement is really a normalization of that.
Marketing and admin in general, this is a typical fourth quarter seasonal catch-up that we do as the activities ramp up during the fourth quarter. Similarly, in terms of technology, we did some accelerated depreciations of charges given the investments that we're making in technology. On the overall year-on-year numbers, like what Noble highlighted on pre-cost and technology cost on establishment, we did some tactical cost savings during the start of the year, given the view that we were having some headwinds on the macro backdrop, we did some tactical cost savings.
Marketing did increase year-on-year, given our focus on improving our group branding and also some of the partnership costs in Philippines are picking up. Admin in general, if you exclude some of the one-off that happened in 2024, on an underlying basis, that was relatively low growth compared to the reported number that you see at 15.2%. Asset quality on slide 16. This remains strong. On the total provisions on a Q-on-Q basis, that is slightly lower. Recoveries is lower given the bigger recovery that we had in the third quarter on the Malaysia oil and gas NEM.
In the fourth quarter, there was quite a significant one coming through Indonesia, but that was lower than third quarter. On the non-retail side, that came down slightly, and that is really driven by the underlying improving on the non-retail side, but we also had some Singapore overlay write-back on a portfolio basis on the non-retail segment. On the retail segment, there is some underlying improvement in Indonesia and Malaysia on the ECL number itself. We also had some MEM refresh coming through in Malaysia, which then resulted in the number coming down lower.
On a year-on-year basis, the higher recoveries year-on-year is mainly driven by Malaysia and Indonesia. On the non-retail side, the slight increase is really driven, if you recall, we did some overlays related to macro uncertainties in the second quarter and also in the third quarter. That drove the number a bit higher on a year-on-year basis. If you exclude that additional overlay that we did on the non-retail side, on an underlying basis, that is actually relatively stable. On the retail side, that has gone up slightly. Overlays, again, impacting some of the variances.
Last year, meaning 2024, we had a bigger write-back in terms of overlay on the retail side that has come off lower, and that drove the number higher. If you exclude those noises on overlay, on an underlying basis, Malaysia, Indonesia year-on-year is slightly lower. Partly driving that slightly lower number is the model deployment. As you recall, I mentioned in Indonesia and Malaysia, we deployed some models, and that resulted in some of the ECL coming in a bit lower on a year-on-year basis. Overall, you can see the numbers in terms of the ratios are all trajecting well throughout the year.
We are maintaining our loan loss coverage well above that 100% level. Slide 17 is a new slide. This is to show our breakdown on our total asset growth as a total, our business franchise. This is where we want to also break down the drivers of growth on the debt and securities level. This is a better reflection of our overall business and not just showing our loans segment. Here, you can see on a constant currency basis that what Novan mentioned, our asset is growing at 6.1%, and our debt securities are growing at 9.2%, driven by Singapore and also Malaysia.
On loans, if you look at it on a constant currency basis, growing at 3.11%. What we mentioned during the third quarter, where we see momentum picking up, you can really see that coming through in the fourth quarter in wholesale banking. The momentum picked up as well and strongly. Within that number of 2.9%, Malaysia wholesale on a Q-on-Q basis grew by 5.8% Q-on-Q. Consumer banking, on a Q-on-Q basis, continued its growth trajectory. Overall, recording at 2.2% year-on-year growth, and Malaysia being slightly higher than that 2.2%.
Commercial banking on a year-on-year basis, relatively flattish, but within that, Singapore is growing at 14% year-on-year on a local currency basis. If you look at it from a perspective of country, Malaysia growing at 3.6% with consumer growing higher at 3.7%. Indonesia, the main driver of that growth is corporate banking and also the auto segment. In Singapore, consumer and commercial both growing at 14% year-on-year. Thailand is actually negative across all segments. On deposit, on slide 19, the CASA ratio is relatively stable if you look at it from a year-on-year perspective.
We did do some optimization on the campaign rates in Thailand and Singapore during the quarter, and that drove the CASA number down lower on a Q-on-Q basis. On the other hand, we saw earlier, the NIMs in Thailand and also Singapore extended. The second point here, you can see in terms of the CASA ratio, despite that coming off for Singapore and Thailand, the CASA ratio has remained relatively stable on a Q-on-Q basis. Another driver of that CASA coming down is on the wholesale banking due to some year-end seasonality and some of the flighty CASA on the wholesale side.
Dividend payouts on slide 20. Novan has gone through this. Just to highlight one more point in terms of the dividend yield, that's at 5.7%. Slide 21, our capital ratios on CET1 has remained fairly stable above that 14% mid level, 14% of CET ratio level. Our liquidity ratios on the right-hand side remains very flush. On the segment PBT on slide 22, consumer banking. You can see here on a line-by-line basis, that contraction is really coming through on the operating income because of that lumpy sale on NPLs that we recorded during the third quarter.
We did, however, have some offset to that with lower provisions, given the MEM refresh that we did for Malaysia. On a year-on-year basis, on the operating income, on the NOI side, this is actually driving a good growth of 14%, where there's the offset is actually on the NII side, which was weaker on a year-on-year basis. Provisions was higher, like what I mentioned, because we had a bigger overlay write-back in 2024. If you exclude that, on an underlying basis, provisions actually fell in Indonesia and also Malaysia. Slide 23, Q-on-Q commercial banking is relatively flattish.
We did record a good NOI growth during the quarter of about 9% for the business on a year-on-year basis. It is impacted by our conservative, proactive provisioning in terms of the macro overlays. It is higher on a year-on-year basis, but the business also recorded some NIM contraction. If you look at the loan side, Malaysia driving that growth higher, but Malaysia is growing by 3.4%, so the reported number is impacted by the currency translation. If you look at CASA, it is also growing very well for Malaysia and Singapore, driving that total deposit growth of 2%, with Malaysia CASA growing close to 7% and Singapore CASA growing close to 15%.
On slide 24, wholesale banking. There is a normalization of an exceptional third quarter in terms of trading and FX, the treasury and markets. You can see that being reflected with the lower operating income. In addition to that, there was a higher write-back coming through from Malaysia in the third quarter. The smaller write-back coming through Indonesia in the fourth quarter impacted the provisions being higher as well. Year-on-year, very good, strong performance on PBT, and this is driven by some of the provisions being lower in Indonesia and also Malaysia.
Slide 25, Digital Assets and group funding. On a Q-on-Q basis, the growth is really coming through from a normalization of OpEx, where we accrued some of those higher bonuses in the third quarter. On a year-on-year basis, slightly lower because of the higher OpEx and also higher provisioning from Philippines. However, if you look at Touch 'n Go Digital, that is growing very well and on a very good, profitable trajectory.
If you look at some of the indicators, the growth of number of registered users is very strong at 11%, now ending the year at 32.3 million. If you compare that with the third quarter, the growth is also strong, and that has remained the trajectory for many years. In the third quarter, that number of users was 31.4 million. In Philippines, in terms of customers, that grew strongly, close to 20%. However, on the loan side, we are tapering it down slightly with a slight negative growth of 1.3% year-on-year as we recalibrate the strategy of Philippines on the Forward30.
Lastly, on Islamic, on slide 26, it is impacted during the quarter performance on the normalization of the NOI. That is slightly lower. On a year-on-year basis, a very good growth, driven by the asset growth and stable NIMs. Provisions as well, was lower. As you can see, in terms of the financing growth, it continues to outpace the conventional growth and growing at 6.4%, and the Islamic deposits also are tracking similarly on the financing side. That is the end of the financials. Thank you, and I pass the presentation back to Novan for the closing.
Okay. Thank you, Khairul. How do we see 2026? I think FX will continue to be a headwind. Malaysia Ringgit vis-à-vis all the other asset currencies, we feel that will be a headwind for us. However, we are not allowing that noise to distract us. The team continues to be extremely focused, doing what we do best, and to execute the four Cs. Therefore, our target ROE for 2026 will be in the 11%-11.5% range. We are on track to achieve our 12%-13% ROE in 2027, which we guided earlier to be our midterm checkpoint for Forward30. What is driving the 11%-11.5% ROE guidance?
We are looking at an asset growth on a constant currency basis of 5%-7%, our cost-to-income ratio to be below 47%, credit costs to be 25- 35 basis points, and our CET1 ratio to be at least equal to or above 14%. With that, I will now end our presentation and take any questions that you have.
Thank you, Novan 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 the first person. It's Yeong Hong. Yeong Hong, please go ahead.
Okay. Hi, Novan. Hi, Khairul. Just three questions from me. Thanks for the 2026 guidance. If you are targeting ROE to be broadly the same level as 2025, what are the levers to get to 12% for 2027? Earnings-wise, if that is lower than our expectations, any other levers that we can pull to get to that 12% level in 2027? That is my first question.
Okay. Thank you, Yeong Hong. The journey to 2027, we have a number of levers. First, with regards to our capital allocation itself, which you will see a lot more focus on the Malaysia business. You saw earlier on page six, the Malaysia ROE has increased from 11% to 12.1%. We're going to be focusing to grow a lot more in Malaysia, vis-à-vis the other markets, which is namely Indonesia and Thailand. You're going to see a lot more capital reallocation from Thailand, to some extent Indonesia, a lot more into Malaysia, which is generating above 12% ROE.
Our focus in Singapore will remain the same, if not slightly higher, where ROE is now at 18%. Think of capital reallocation from Thailand, Indonesia, into Malaysia and Singapore. That's the first lever. Within each of these countries, there's going to be a lot more relentless focus on non-interest income. The focus on the wealth business, focus on our wholesale business with Singapore as a wealth and treasury hub, focus on transaction banking, which will facilitate our cash business. All that will grow NOI. Treasury client sales, that you saw very strong growth this year versus previous years.
A lot more client franchise NOI, which will also boost our ROE. We're going to continue the discipline on cost that you have seen over the last many years. OpEx growth is roughly about 3% year-on-year, last year was 2%. We're going to continue with that discipline on cost. We're going to continue with the discipline on asset quality. We saw a GIL at the lowest ever for CIMB, credit costs to remain contained. On the capital side, we announced the capital return program up to end of 2027. We're going to execute that. I think when we put all these levers together, we are confident of achieving the 2027 ROE guidance.
Yep. Just following up on your capital, to get to that ROE, can we maybe have the thinking that the capital return will be earlier, if not front-ended, so that basically that would give us a better base get to the ROE target in 2027? Is that a right way to think about that?
Yes. We always proactively think of capital. We value the capital from our shareholders a lot. We're always proactively thinking about how to return it faster. This is excess capital that we have committed anyway. You saw what we did in the last quarter, where market was not expecting us to do a special dividend. We chose to do a special dividend earlier ahead of time. You saw how we executed this over the last two years, where we had excess capital. We've turned that as special dividend. We're going to continue executing this, like how we've executed in the past.
At the end of the day, it's a balance of many factors that we need to take into account. We will continue to be vigilant about it.
Yep. Thanks for that. Maybe on margins, I may have missed that earlier. Is there any guidance on margins for this year?
Yeah. Yeong Hong, in terms of the margin guidance, for the group, we are looking at ±5 basis points. Relatively stable, ±. Within that, I think more importantly, if you look at Malaysia, we're looking at Malaysia to be stable to slightly expanding. Niaga has given their guidance is a ±10 basis points to 3.9%-4.1%, where we see potentially some further weakening in Singapore. Singapore, I think it would be less than what we recorded in 2025 as what you saw in SORA, even though weakening has stabilized compared to what we recorded in 2025.
There should be some weakening of that. I think where the offsets to this is really Malaysia, where we're looking at stable to slightly expanding. In terms of our rate outlook in Malaysia, we are expecting rates to be stable versus the negative impact that we had in 2025. That's number one. Number two, to the point on our cash strategy, that will continue to gain traction, going into 2026. That will help our margin trajectory. Lastly, we continuously optimize the higher cost of funding, wholesale funding that we did.
We managed to do that already for the last couple of years. We'll continue doing that again in 2026. Just as a number, last year in 2025, we reduced our wholesale funding by about MYR 5 billion on an endpoint to endpoint. We'll continue to try and optimize the expensive funding in 2026 as well. That will help that margins in Malaysia to be stable to slightly expanding. Overall, just to recap, at the group level, we're looking at ±5 basis points.
Yep. Sorry, just one small follow-up. What are the scenario where you see margin expanding by 5 basis point, and what are the scenario that you see margins coming down by 5 basis point?
I think, the main lever is because, I think, two parts, which is our two biggest markets. One is Malaysia, the other is Indonesia. If you look at Indonesia, the range is ±10 basis points. We have seen liquidity environment improving in Indonesia over the second half, and that has been sustained in the fourth quarter. Similarly, in the first so far, that liquidity environment has been stable. I think we still have a long way to go to the end of the year. That liquidity has to remain there. Competition has to be fairly rational for us to get to the upper end of that range, where Niaga has guided. That's number one.
Number two, our biggest market will be the biggest driver, which is Malaysia. So far, liquidity has improved slightly, if you look at it from this year, starting of the year. The continuation of that maybe could give us some slight upside to margins in Malaysia. That will drive that upper end of our guidance.
Okay. Thanks a bunch. Thanks, Khairul. Thank you.
Thank you.
Thanks, Yeong Hong. The next question comes from Harsh. Harsh? Harsh Modi?
Hi, can you hear me?
Yep.
Hi, thanks for this. Just one question. I understand your payout was in line with guidance, how do we think about your guidance on regular moving over next couple of years? Special, I understand as you have guided for a number, you've already started paying, and you'll do it as you can release. That's on, as it comes through, you'll do. Special is 55 the number we should plan for over next two, three years, or even that number can increase meaningfully over the next few years. Thank you.
In terms of our dividend payout of 55%, we've been sustaining that for the last three to four years. Looking at the growth trajectory and giving that stability to the market, I think we need that number to be a sustainable number, a really sustainable number. That sustainable number is really driven by all the entities within our group and how we extract that capital to the holding level. We believe, based on our trajectory, this is the sustainable number of 55%. We do continue reviewing this number, and if you look at our guidance, it is stable at the 55% level, given how we have optimized all the capital levels in all the entities.
Basically, unless and until there is any release of capital, be it Thailand, be it Basel norms or what have you, or maybe higher payout from Niaga, it is not likely that we will end up getting above and beyond your 2 billion commitment at 55, we should not pencil in anything else.
Based on today's view and outlook on growth and what excess capital we can extract from all the various levers that we have, both Malaysia and outside Malaysia, this is the level that we are comfortable with in terms of 55%, and also, the capital return that we have committed up until the end of 2027. That will be all that at the moment.
Khairul, if I just want to double-click on that, let's say assuming that about MYR 1.3 billion, MYR 1.4 billion remaining on special out of MYR 2 billion, that comes out from, let's say, optimizing capital elsewhere and narrowing that gap between group and bank to an extent. Is 55% enough to optimize your ROAs, or to optimize your returns, ROEs in particular, or you can push up to 60%-65% over a couple of years?
The basis of this 55% is more or less with the current projection of CET1 and outlook. Right. We are maintaining a stable capital ratio broadly across all our entities, including GH, with this 55% payout. On top of that capital return that we have committed. If we want to optimize further, it depends on many, many other levers. If we can optimize our CET1 further, that's where there could be that potential higher dividend payout, firstly, from all our entities, that hopefully that can translate to a higher payout at GH as well, at Group Holdings as well.
All right. Thank you.
Thanks, Harsh. We do not have any further questions at this point in time. Please do use the raise hand function, guys, if you wish to ask any questions. We have one coming from Tushar from Nomura. Tushar?
Hi. Good afternoon. Thank you for taking my question. The first question is on Indonesia and Niaga. Given the developments in Indonesia, the increased scrutiny on free float and the discussion that Indonesian stocks might need to increase free float to 15%, what would be your considerations in deciding whether to sell in the market or do a dividend issue like how it had happened in 2016, I believe, when the previous round of free float increase was required?
Thank you, Tushar, for your question. At this point in time, yes, there's a talk of the 15%. There is no policy in terms of how you will get there at the moment. I think the indication is over a period of time. From our perspective, all options are on the table. If there's a requirement to then increase our stake, then we will consider all options, whether is it a re-IPO in the market, or whether is it a DIS. It all goes back to which one gives us the best value. The reason I mentioned the word re-IPO just now is because, today, Niaga at 7% over free float, the liquidity is thin.
The trading doesn't reflect the true value of the business, which is achieving a 30% over ROE. Therefore, if we were to ever want to consider increasing stakes via selling some stock, then it needs to be via a full-on marketing process. At the end of the day, all options are on the table for us, and we will execute the one that extracts the best value.
Okay, thank you. Just want to understand the minimum CET1 required by end of 2026, which you are targeting at greater than 14%. I understand that the structure of CIMB is a bit different, where dividends are paid out of Group Holdings level. Group Holdings CET1 is more important. Is it fair to say that Group Holdings at this kind of structure versus all of your peers, where bank level CET1 is more important, you need to maintain a higher, Group Holdings level CET1, versus others, where bank level CET1 can be lower?
The answer, short, is no. It's similar. It's the same, right? Whatever capital levels, because we are covered by Bank Negara Malaysia, whatever capital levels that's required at CIMB Bank, CIMB Islamic, CIMB Investment Bank, similar to CIMB Group Holdings. It's not more that is required at the holding level.
Okay. Thank you. Those are all my questions.
Thanks, Tushar.
Once again, if you do have any questions, any burning questions you'd like to ask, please do use the Raise Hand function. Next question comes from Benjamin from UBS. Hi, Ben.
Hi, everyone. Hi. Thanks, Steven. Hi, Novan. Hi, Khairul. Thanks for this opportunity. I just have one quick question. Just now you mentioned that the stronger ringgit has been a headwind to the performance at CIMB. Just wanted to get some rough sensitivity, like let's say if the ringgit were to strengthen another 5% or whatever number you have in mind, what is the downside to the ROE guidance that you have? That would be very helpful. Or if Malaysia ringgit were to depreciate versus a basket of currencies regionally, what would be the impact on your earnings and your ROE? Thank you.
Yeah. I think the sensitivity is relatively mechanical, right? Given the contribution of Niaga and our overseas operations. Niaga is actually the one that is impacting us the most with the PBT contribution of that 32%, right? To a lesser extent, a very small component in terms of US dollar, but it's not material, driver. That's not material. The main one is actually Indonesia and, to a certain extent, Singapore as well, right? If you look at how we have managed that, which was very challenging in 2025, we're still within that 11% to 11.5% ROE, right?
That is a reflection of our diversified business, with Malaysia performing very well in terms of the ROE, as mentioned, on a year-over-year basis. Of course, we are susceptible to that sensitivity that you mentioned. We are going to be very agile to still focus on meeting our guidance of 11%- 11.5%.
Yeah. I think my answer is actually there's no impact. We're not speculating on the FX. We're focused on executing and doing what we do best. Yeah, as FX move, it then impacts our numbers, and we will see how that impacts our numbers. Therefore, we will be agile, and we will pivot our strategies accordingly. Whatever it is to make sure that we achieve what we have guided the market.
Thanks, Khairul. Thanks, Novan.
I think, yeah, there are no further questions at this point in time. Hang on. Yeah, Andrew Sun from Orion, are you there?
Yep. Hi. Happy Friday.
Hi.
Just a question on your guidance. I noticed that in terms of what you put down, asset growth guidance instead of loan guidance. Is that something more to be read into that?
Sorry, can you repeat that? I think you broke up, yes.
In terms of the guidance that you mentioned, the asset growth guidance that you put down, yeah? In terms of what you put down, it's 5%-7%. Is there any difference with loan growth guidance?
Yes.
Translate that to loan growth guidance? Yeah? Okay.
Sure. The reason why we put asset growth is, that's how we operate our business. From our capital and deposits that we have, we then mobilize it into either loans or either through securities. We are a large universal bank that's also a strong investment bank. When we advise our customers to raise financing, it's the financing that makes most sense for them. If a loan makes more sense, we extend a loan. If a bond makes more sense, then we advise them on a bond, but we can also use our balance sheet to underwrite part of the bond.
If an equity makes more sense, then we advise them to raise equity. That's why we are focused on an asset growth guidance rather than just too narrowly focusing on loan growth per se. With regards to our own internal numbers, as part of this 5%-7% asset growth, loan growth is a subset of that. If I were to look at Malaysia, which is our largest market, we are looking at growing loans at about 4%-5%, which is in line with the GDP. It would differ across all markets. At the end of the day, our business plan is around an asset growth strategy.
Sorry, can you remind me what the loan growth guidance is for Indonesia and Thailand as well?
Yeah. Indonesia is at 3%-5%, right? Singapore will be in the higher single digit, and that's driven mostly by SME and also consumer. In Thailand, we're expecting the market and the environment to still remain fairly challenging. In Thailand, it'll likely be a negative growth. This is on loans specifically, but again, I spoke to you a bit, we are looking a bit more from an asset point in totality for all the countries as well.
Yeah. Got that. Thanks.
We're a very big bond house, right? Therefore, when we make NII, the cash that get deployed either through loans or through securities, we still make NII from that, just that the bonds then allow us to trade it as well. That's why we're going on an asset growth basis. Just want you to understand that.
Okay, understand. Thank you. Just to follow up on the Malaysian loan growth of 4%-5%. Can you help me understand? I mean, the GDP growth has been strong and we should be seeing GDP growth in the high 4s, if not 5%, in terms of forecasts for this year. At the same time, you're focusing growth more on Malaysia going forward. Why is loan growth only at 4%-5% for Malaysia?
Again, we're a big universal bank, which includes a large investment bank. Our clients in Malaysia, they raise financing either through loans or through the capital markets, which is the bond market. I mean, the Malaysian bond market grew a lot more compared to the loan market last year, and we are number one player in the bond market. From our perspective, it's all about what makes sense most for our customers.
If it's a lot more efficient for them to raise bonds, and we did a lot of bonds for our top clients last year, then we will advise them to raise bonds, but we will then underwrite part of the bonds, and that goes on our balance sheet. That's why the focus on asset growth. I wanted to take your focus away from just loan growth alone, because that's not how we operate our business, unlike maybe some of our peers. Look, at the end of the day, it makes more sense for our customers to do loans, then you will see the loan growth number grow a lot more. I don't want you to be too fixated on the loan growth number.
Okay, thanks for that. Just to follow up on that again. How should we think about NOII as a percentage of total income or NOI growth for this year then?
I think for this year, right? If you look at it from a numbers perspective, we ended the year in terms of proportion at 31.7%. Given our focus on two things, one is cross-sell, on the client franchise component. Secondly, also on the bond side, that also create a lot of opportunity on NOI. We do expect NOI to grow stronger than NII, and that is somewhere slightly higher than the mid-single digits of our level for NOI. That proportion, we are targeting that to expand further in 2026.
Expecting NOI to grow stronger than NII, that's also including, the fact that you might have a higher base in terms of bond sales from 2025?
Obviously, yes.
That's not the main reason. I mean, our NOI growth, as I presented earlier, the client franchise part grew faster than NII itself. In fact if you look at the earlier page 14, last year, our client franchise of trading and FX is actually higher than our trading income. Yes, there will be trading gains. We will take trading gains as they come, but the focus is on client franchise business. Where we make treasury client sales, where we make fees and commissions from either our banking products, our investment banking advisory. The contribution of NOI will come from both, but I would say a lot more on the client franchise side.
Yeah, understand. Thank you. Thanks for that.
Thank you.
Thanks, Andrew. Just one more, I think, from Jithan from Murphy. You there?
Hi.
Hi.
I have just a couple of questions on Singapore. I may have missed it, but could we get the in-house view on where SORA rates are going, and what's underpinning expectations for 2026? As well as a little bit more color on credit costs for Singapore. If you could share any numbers, would be great.
Yeah. I'll take the credit cost numbers first for Singapore. I won't share a specific number, but in terms of directionally, right? In 2025, we recorded quite a significant net write-back in Singapore. Going into 2026, we still expect the credit cost for Singapore to be relatively flat-ish. Meaning, not a write-back position, but a very small credit cost as there are some pipelines of further recoveries coming through in 2026. Very small credit cost number. Yeah, okay. On the point on SORA, right?
We have some views on where it will go. We're looking at around 50 basis points further lower or so.
Okay, great.
For the year. Yeah.
Okay, great. Thanks so much.
Thank you.
Yeah, I think there are no further questions at this point in time. Okay. If there's no further questions, I'd like to pass back to Novan for his closing remarks.
Thank you very much for your time on a Friday afternoon to join our presentation. For those that are fasting, I just want to wish you Selamat Berbuka Puasa. See you all again soon. Thank you very much.
Ladies and gentlemen, that concludes our briefing for today. Thank you for joining us. I wish you a good evening ahead.