Good evening, ladies and gentlemen. Welcome to CIMB Group's financial results briefing for the fourth quarter of 2023. Our host today is our CIMB Group CEO, Dato' Abdul Rahman Ahmad, and Group CFO, Khairul Rifaie. My name is Steven from the CIMB IR team. By now, you should have received the analyst presentation and financial statements by email from CIMB Group Investor Relations. If you have not, the documents can be found in the investor relations section on our website at cimb.com. Before we begin, please be informed this briefing is being recorded. We encourage you to include your name and company, when you're asking any questions to allow us to identify you. Note that all participants' lines are currently on mute. You have the opportunity to ask questions after the presentation. Please use the raise hand function for that.
At this juncture, I would like to hand over the briefing to Dato' Abdul Rahman and Khairul Rifaie, to present the results. Dato, over to you.
Thank you, Steven. Firstly, I would like to welcome all of you for joining us for our financial year 2023 results briefing. Appreciate you guys making the time, especially late on a Thursday. I know that we are the last in terms of announcing our results. Let me start. In terms of yet another what I call a very positive and strong year ahead, we achieved all but one of our targets, particularly I think on the ROE side. We ended the year 2023 with 10.7% ROE. This compared to 10.2% core ROE in 2022 and 9% ROE in last year. This robust performance really is underpinned by three main things. One, I think we are able to still deliver what I call a very solid operating income year-on-year growth.
This is driven by strong NOI expansion. This was partially offset by the NII contraction due to NIM compression. Second, we're happy that our loan deposit and CASA growth were strong across all targeted segments and geography. Third, we benefited from lower sustainable provision, from prudent risk management recoveries and portfolio de-risking. As such, I think we reported 28.3% year-on-year growth in reported net profit to close to MYR 7 billion . I believe this reflect positively the impact of the initiatives under our Forward23+ strategic plan. Next, I think we are also pleased to announce that we are paying a dividend payout ratio of 55% in 2023. We are also proposing a special dividend amounting to MYR 747 million , bringing the total dividend to MYR 0.43 per share for the year, or close to MYR 4.6 billion .
This, I think, reflects something that we discussed with all of you previously, which is how we can capital-optimize better going forward. We are happy to be able to actually to start this particular process in our results basically for 2023. Our CET1 remains strong post-dividend. We sustain it at 14.5%, 14.8% as at end of the year. Let me basically just give you a five-year performance highlight, and this is something that I think we are particularly proud of. In terms of net profit, if you look at where we were in 2019, I think we were the bank in terms of profit, we were third largest. I think we are now clear number two in terms of net profit. We grew our net profit from MYR 5 billion to MYR 7 billion.
Second, I think you all would remember that we were known to be the bank with the highest cost-to-income ratio. In 2019, we were 53.4%. We ended up 2023 at 46.9%, making us no longer, in terms of the highest cost-to-income ratio bank. In fact, I think now we are really driving down to what I call the top quartile in terms of cost-to-income ratio. Last, I think in terms of the ROE, we have been able to grow from 9.3% in 2019 to 10.7%. Again, making us now probably in the second tier of top quartile ROE amongst Malaysian banks. We are also pleased that I think the strong performance over the last four years has been recognized by market. Over the last four years, we take 1st of June 2020 to today's share price, we've created close to MYR 38 billion in shareholder value.
If you decompose that between market cap change and dividend, I believe effectively MYR 31 billion in terms of share price increase, and close to about MYR 7 billion in terms of dividend that we paid to shareholders over the period. This means that in terms of our annualized TSR, we delivered close to 20% annualized TSR for the last four years. This obviously significantly outperformed not just the FBM KLCI, which went up, TSR is only 1%, but also KL Financial Index, which during the period only grew, or only provided TSR of 9.2%. That's, I call it a very I would like to highlight the work and the impact that I think we've been able to actually deliver over the last four years. Let me just give a quick summary of our key highlights of 2023 results. I'll get Khairul to present in greater detail this result.
Generally, if I can just summarize. First, I think we are pleased despite, I think you all know, the very challenging NIM environment, because of elevated cost of deposit, we were able to still grow our operating income by 5.9% year-on-year and 1.3% quarter-on-quarter. This, of course, is basically because of the robust NII, which we've been able to actually deliver. Underlying, I think in terms of loans, deposit, and CASA, that's been pretty positive. Loan grew 8.3% year-on-year, deposit grew 8.1% year-on-year. The one that I think we are most pleased about is our CASA extended at 11.5% year-on-year. With this, our CASA ratio has moved back to what we call during the pandemic level of 41.2%.
I think this reflects the progress that we have been making as part of our strategy to enhance our CASA and deposit franchise. One element that we have to recognize, OpEx basically trended higher. We recorded marginally higher cost-to-income ratio of 46.9%, with OpEx rising 6.9% year-on-year. That's mainly, I think this is something that you saw across all banks in Malaysia because of the inflation as well as the technology investment that we are undertaking. The other element I wanted to highlight that really drove our underlying performance, has been the significant improvement in asset quality. Our credit cost, we ended up the year at 32 basis points. This is significantly lower than 51 basis points in 2022 and significantly lower than our Forward23+ 2024 target that we set ourselves four years ago.
This predominantly comes from what I call a moderated credit environment, more importantly also on the asset quality initiatives that we've been undertaking over the last three years. Because of this, operating income strong, lower provision, we've been able to report, on a reported basis, PBT, increasing by 14% year-on-year. Even though I think on a quarter-on-quarter basis, it is 6.5%. Net profit grew 28.3% year-on-year. With that, as I mentioned, our ROE improved to 10.7%. I just cover the highlight, is obviously about our dividend. We were able to announce a MYR 0.185 share dividend, translating to maintaining our dividend payout ratio of 55%.
On top of that, we are proposing to pay a special dividend of MYR 747 million, which is MYR 0.07 per share, which brings the total dividend payout to a record amount of MYR 4.6 billion or MYR 0.43 per share. As I mentioned, the CET1 ratio remains strong at 14.5% post-dividend. I'll pass to Khairul to take us through. Happy to answer the question at the end of Khairul's presentation.
Thank you, Dato', good evening, everyone. Firstly, in terms of our key highlights on slide six, like what Dato' mentioned, we recorded a robust revenue growth both on a QoQ and year-on-year basis, we grew 1.3% QoQ and 5.9% year-on-year. This is a reflection of our diversification in terms of our portfolio. You can see from a year-on-year basis, Singapore are driving that growth at 33.7%. Malaysia as well, despite the challenging backdrop in terms of NIM pressure, we managed to record good growth of 1.9% year-on-year. Our cost was within our expectation. It went up by 6.9%, however, because of the NII challenges, we recorded a negative jaws of 1 percentage point, therefore, our cost-to-income ratio went up by 40 basis points.
As what we highlighted at the beginning of the year, we had specific initiatives on our CASA. We did see the market in terms of that pressure coming through, but our initiatives, especially in terms of the non-retail side, started to bear positive results in the second half of the year. We ended our CASA ratio 1.3 percentage points higher on a year-on-year basis. You can see the main driver of that growth, wholesale banking, growing at 14.8% year-on-year. As what Dato' highlighted earlier as well, in terms of our asset quality profile and risk profile of the group, that has improved significantly year-on-year, a reflection of our reshaping of our portfolio. You can see across all the key ratios, loan loss charge has come down to 32 basis points.
Our gross impaired loans ratio has improved by 60 basis points to 2.7%. Our allowance coverage as well has improved by close to four percentage points to 97%. Next slide seven, briefly on highlights of our PBT by segment. Firstly, on the consumer banking side, an increase in profits by 8%. This is mainly driven by lower provisions. However, on a QoQ basis, our profit was down. This is mainly due to taking a conservative approach on the Thai consumer NPL portfolio. Commercial banking recorded very good growth both on a year-on-year and QoQ basis. Year-on-year, a very strong top line growth of NOI at 35% year-on-year and also a lower ECL.
On a QoQ basis, the main driver of that strong growth is lower ECL and also some write-backs coming through in Malaysia Wholesale banking, good growth and moderate growth, at the 2% sort of level, both on a year-on-year and QoQ basis. Year-on-year, very strong NOI growth driven by treasury and markets. However, that was partially offset by the significant write-back that we had in the previous year. On a QoQ basis, very strong top-line growth at wholesale banking at 7% up QoQ. However, this is partially offset by higher OpEx due to the restructuring costs that we initiated during the fourth quarter. On CDA and group funding, if you look at it from a year-on-year perspective, the main driver is really the improvement in CDA. On a QoQ basis, that performance was impacted by the year-end accruals that we recorded for the fourth quarter.
On slide eight, highlights of the PBT by country. Malaysia, recording a 9.3% growth in terms of PBT on a year-on-year basis. That's mainly driven by very strong, robust NOI and also lower provisioning. On a QoQ basis, the strong performance is driven by fee income and also lower provisions. In Indonesia, on a year-on-year basis, 35.8% growth is mainly driven by higher other income and also lower provisions. On a QoQ basis, that's driven by lower provisions. Thailand, the weakness on a year-on-year and QoQ basis is driven by the challenging top line on a year-on-year basis, and also driven by some of the conservative provisioning that we took during the second half of the year, impacting our year-on-year performance. Similarly, on a QoQ basis, the conservative provisioning in the fourth quarter impacted the profitability in the fourth quarter. In Singapore, a very strong performance at 30.6%.
Like what I mentioned earlier, this is really driven by that strong revenue growth of 33%. On a QoQ basis, the top line is sustained. However, the PBT was impacted by the absence of a write-back that we recognized in the third quarter. Breaking down the P&L, firstly on operating income on slide seven. Overall, the strong, robust growth of operating income, both on a QoQ and year-on-year basis, is really driven by NOI. You can see on a QoQ basis, NOI grew by 7.9%. However, that is partially offset by NII weakening by 1.5% QoQ. This is driven by the 10 basis points margin compression QoQ. I'll just deep dive a bit on this 10 basis points margin compression QoQ.
Within that, Malaysia, on an underlying banking book basis, that only slightly contracted in the low single digit. This is mainly due to what we have highlighted before, the seasonal pricing pressure that we saw, especially on the wholesale funding side towards the end of the year. On a reported basis, Malaysia contracted QoQ in the high single digit. This is mainly coming from the Treasury and Markets book. In Indonesia, as what you have already seen, right? Our margins did contract by 28 basis points QoQ. This is impacted by the significant volume in terms of the short-term, low-yielding corporate loans. Similar to Malaysia as well, Indonesia was impacted by the seasonal pricing pressure in the fourth quarter. In the fourth quarter as well, we had some narrower spreads on our bond assets. This will likely recover in the coming quarters.
What's offsetting this is Singapore on a QoQ basis, expanded margins by 5 basis points. That is both coming from the asset and liability side, whereas in Thailand, slightly offsetting it, is contracting by 17 basis points on a QoQ basis. This is mainly because of the market opportunity that we saw. We bought a significant amount of bonds at lower yielding compared to the average asset yield of our book. That is to take some potential opportunity in terms of the markets in 2024. If you exclude that significant purchase of bonds in Thailand on an underlying basis, margins in Thailand was broadly stable. Similarly, if you look at our NII on a year-on-year basis, the 3.5% contraction is really driven by the margin contraction of 29 basis points.
Most of this pressure is coming from the Treasury and Markets book, where a lot of the income is booked under NOI. From the banking book perspective, the margin compression on a year-on-year basis is around the low teens of level. The driver in terms of the overall margin, if you break it down by country, Malaysia and Indonesia is contracting higher on a year-on-year basis in 2023 versus the group average. Thailand is slightly lower than the group average contraction, where Singapore expanded margins on a year-on-year basis. Our robust operating income is really driven by our strong NOI. On a QoQ basis, NOI grew by 7.9%. That's mainly driven by fee and other income. This is really driven by the underlying fee income where wholesale banking, Malaysia booked some significant fees during the quarter.
Similarly, there was some lumpy recognition on Consumer Malaysia related to credit cards. Trading, I would say that it's relatively flattish, just slightly down by 1.1%. We had a very good third quarter, and this is more or less sustained into the fourth quarter. On a year-on-year basis, trading and market-related income was really driving the NOI growth. Another driver is under other income, where we recorded an NPL sale of about MYR 300 million, and the bulk of that coming from CIMB Niaga versus last year of just slightly under MYR 100 million. Moving on to expenses on slide 10. It picked up quarter-on-quarter, and this is mainly due to the catch-up in year-end accruals, particularly under personnel costs related to bonus and also admin and general expenses, mainly due to the accruals.
During the fourth quarter, under personnel costs, as I mentioned earlier, we also booked one-off restructuring costs, related to wholesale banking restructuring that we did. On a year-on-year basis, the 6.9% growth is driven by personnel costs due to the inflationary wage pressure and some of the investment in terms of hiring that we did. Technology cost continues to be a driver, given our tech investments that we've made in the last few years. Marketing spend, in terms of percentage, did increase significantly, but the driver of this is really on the Philippines partnership variable costs. Like I highlighted earlier, because of the NII pressure, we did record a negative jaw of 1%. In terms of our cost-to-income ratio, that ticked up by 40 basis points year-on-year. Moving on to provisions on slide 11.
On a quarter-on-quarter basis, our provisions went up to 31 basis points versus the third quarter of 21 basis points. If you go by segment, on the retail side, the increase to MYR 435 million is driven by two. Firstly, the Thai provisioning, where we took a more conservative view on our NPL portfolio. Secondly, in the third quarter in Malaysia, we had some write-backs in third quarter. On the non-retail side, that came down, and that's driven by two things as well. One is that we had an upgrade on the name in the aviation sector. Secondly, we also had some write-back under Malaysia Commercial. Under recoveries, that increased on a quarter-on-quarter basis, and that is mainly driven by the aviation sector recoveries coming through under the recoveries segment.
On a year-on-year basis, if you look at retail, that has come off significantly to MYR 1.3 billion. If you recall, in 2022, especially towards the middle of 2022, we added overlays. In 2022, we added overlays of about MYR 400 million, and the bulk of that was under consumer. If you look under non-retail, that has also come down to MYR 1.4 billion versus MYR 1.5 billion last year. We didn't make any significant provisions this year. We did top up, if you recall, in terms of our Malaysia leisure exposure. We also took, during the third quarter, some conservative assumption from a portfolio basis on our Malaysia commercial NPL, and that was booked this year. In terms of recoveries, that has remained stable on a year-on-year basis.
In both years, the bigger recoveries that we recorded were similar in last year and this year, which is attributed to Malaysia and also Singapore. On the asset quality ratios on Slide 12, you can see the improvement in terms of our credit costs coming down to 32 basis points, even lower than our 2019 position of 45 basis points. Similarly, if you look at our ratio, that has now come down to 2.7%, a 60-basis point improvement compared to last year. If you compare that even in the pre-pandemic level of 3.1%, that's a significant improvement. What is more significant is the allowance coverage compared to pre-pandemic at 80.7%, we are now at 97% allowance coverage, and also an improvement compared to last year of 93.1%.
On our balance sheet momentum, Slide 13 on gross loans, the momentum picked up on a quarter-on-quarter basis that grew by 2.1%, driven by consumer banking and commercial banking. On a year-on-year basis, the main driver is more on the non-retail side. Breaking that down by country, in Malaysia, that 5.3% growth is mainly driven by commercial growing at 8%. Consumer and corporate in Malaysia was growing at about 5%. In Thailand, the driver of that growth is consumer, growing at 10.4%. In Indonesia, the main driver is corporate and consumer. In Singapore, the main driver is corporate, growing at 13% year-on-year. On the deposit side, this is where the momentum further picked up during the fourth quarter in terms of our CASA growing at 6.6%. This is across segment, but in particular, non-retail are growing higher than that level.
It's also worth highlighting that Malaysia consumer recorded growth during the fourth quarter. We saw some stabilization towards the end of third quarter, we managed to record our growth on the Malaysia consumer in the fourth quarter. You see the strong 11.5% year-on-year growth translating to our improvement in terms of our CASA ratio, improvement by 1.3 percentage points to 41.2%. That improvement, if you look at it from a country perspective, is across Malaysia, Indonesia, and also Singapore. Slide 15, just a bit more color on what Dato' mentioned earlier in terms of our dividends. If you look at it from a BAU perspective, we are maintaining the payout of 55% in our second interim, similar to our first interim of 2023, and that is increasing compared to 2022 from 50.5% payout to 55% payout.
Similar to 2022, we are fully paying that in cash. On top of that, we are having a special dividend of MYR 750 million, and that's equivalent to MYR 0.07. This is coming from our optimization of capital, which brings the total dividend to MYR 4.6 billion, which gives a yield of 7.1%. Like what Dato' mentioned, we will further explore capital optimization opportunities in 2024, which is, of course, subject to regulatory requirements, approvals, and also in terms of the macro backdrop. Despite us increasing this payout and special dividends, our capital remains strong and is stable on a year-on-year basis at 14.5%. If you look at our liquidity ratios as well, that is on an improving trend on a quarter-on-quarter and also on a year-on-year basis. Moving on to performance by segment with consumer banking first on Slide 17.
If you look at the PBT coming down, that's mainly driven by higher provisions and also some of the NIM contraction impacting NII. On a year-on-year basis, a good growth of 8%, and this is mainly driven by lower provisions as we booked in the prior year, in 2022 overlays. In terms of the asset momentum, strong growth of 7.4% mainly driven by Thailand and also Indonesia. Commercial banking on slide 18. That strong growth in terms of PBT during the quarter is driven by the lower ECL as we took that portfolio conservative view on Malaysia NPLs, which impacted third quarter ECL. This quarter, we also had some write-backs coming through in Malaysia commercial. On a year-on-year basis, strong growth of PBT on 22.6%. The main driver is that strong NOI growth of 24.5%, mainly driven by FX fees.
Provisions as well, are driving the PBT growth, being lower due to lower provisions in Malaysia and also Indonesia. The strong growth of our assets is mainly driven by Singapore coming from a low base, growing at 18.6% year-on-year. Wholesale banking on slide 19. In terms of the QoQ growth, growing at 2.6%, you can see the top line growing very well, driven by both NII and NOI. You can see at the wholesale banking level, the significant tick-up in terms of OpEx, this is mainly due to the one-off nature of the restructuring costs that will result in quite a material cost saving at the wholesale banking level going forward.
On a year-on-year basis, moderate growth of 2.9%. If you look at NOI in terms of the strong growth, that's really driven by the trading and FX market related income, mainly in Malaysia and Singapore. What's offsetting that, because we had a significant recovery in 2022, that tick-up in terms of provisions partially offsetting the strong NOI growth. On CDA and group funding on slide 20. If you look at the QoQ, contraction in PBT is really driven by higher OpEx, that's really driven by the year-end accruals that we did. On a year-on-year basis, that strong growth of PBT is driven by the top line growth, mainly on CDA, in particular Philippines, but also some investment-related income. For the year, CIMB Philippines, that's what we highlighted earlier and also during our Investor Day. We have broken even 2023 for Philippines.
In terms of indicators, the momentum continues to be positive. We grew a number of customers by 13.8%. In terms of our deposit balance is now touching the MYR 2.1 billion mark, growing by 24% year-on-year. Similarly, Touch 'n Go Digital as well. If you look at the indicators, that momentum continues to be positive. In terms of the total registered users, we are at 26.3%, which is a 41% year-on-year growth. Annual transacting users is now at 15.7%, which is a 70.7%. Lastly, on Islamic banking on slide 21. The contraction QoQ, in terms of PBT, is mainly driven by higher provisions. On a year-on-year basis, the slight contraction of PBT is really driven by OpEx and also provisions. However, if you look at the momentum on the asset side, that continues to be positive, growing at 13.8% year-on-year.
That's the end of the financial, I pass this presentation back to Dato'.
Thank you, Khairul. Let me do a quick progress update in terms of our Forward23+ strategic plan. Most of you are aware that the plan was developed four years ago. We are at the final year of implementation, and we expect to develop our beyond 2024 strategy come probably by third quarter this year, when we'll be sharing it with all of you once developed. Actually, slide 23 effectively is something that you guys are very familiar with. Slide 24, we think that we are building a very positive momentum towards meeting our Forward23+ ambition. I mentioned to you about our shareholder value creation as well as dividend yield, I wouldn't belabor that particular point. In terms of portfolio reshaping, I think we have virtually completed. I think going forward for 2024, we'll probably not show this slide anymore.
I think we are now quite comfortable in terms of where our portfolio is. As you can see, basically areas that we wanted to invest continue to actually to grow. For instance, consumer grown like 24%, Malaysia 21%, commercial Malaysia is like 31% from 2019, and Indonesia consumer have grown as a book to 33%. Indonesia commercial, we believe we have fixed the issue, and we will start effectively regrowing the book. We ended up 2023 with a 4% growth rate. We will not go crazy. We would like basically that for it to grow probably 4% or 5% basically level. I think that decline in that book has stopped, and we intend to actually to now regrow the book judiciously. Thailand exit, in terms of Thailand commercial exit, is in progress.
I think we downscale further by another 25% in 2023, down close to like 73% since we embarked upon it. I think we are down to like 25% of the balance to what we had in 2019. Next slide. Also, I think we probably would change this slide going forward. Before, if you recall, a lot of issues about our digital reliability. I think we have managed well this issue. I'm not saying that it's 100% solved. Obviously, in terms of architecture and complexity of a large financial institution is complex. I think we have now good handles. If you look at it, our availability rate has been sustained over the years. But this year, particularly Malaysia Clicks, I think in October, we have been hitting 99.9%. There is more unscheduled downtime on our Clicks in 2023.
The good news, I think, in terms of recovery, I think we've been able to do. The problem effectively are isolated. We are able to isolate the issue better in such a way that I think in terms of the customer experience impact has been quite limited. We are also, I think, happy to report probably hit the peak, and we'll start moderating our technology CapEx. This year, even though we budgeted, sorry, 2023, even though we budgeted MYR 900 million, we ended up slightly below MYR 800 million. That's part of our optimization strategy. We've been able to execute and contract out some of the CapEx at lower cost. We think that, basically, in terms of going forward, the level of CapEx can come down. It will not come down significantly. We would like to continue to invest in the business.
We believe that the peak is over. In terms of, I think, it's where most of you are interested to actually hear. I think the journey that we've been taking since 2019, most of you are aware of what are the drivers behind that. It's really about the portfolio reshaping, the OpEx take-out, which is close to more than MYR 1 billion over the last three years. ECL reduction has been significant. We've been able to do that. Where we land, which, basically, we landed at 10.7%, particularly, I think, two drivers that really we didn't anticipate when we embark upon this journey. First, I think, the NIM compression, meaning the NII growth was much higher than we anticipated. We didn't anticipate effectively in terms of the competition, in terms of cost of deposit.
The more, I think, larger number, effectively, is really about having to hold higher CET1 ratio. As you know, our CET1 ratio as at end of December 2023, is at 14.5%. When we did our Forward23+ plan, we were projecting 13.5%. Now, if we had kept capital at 13.5%, our 2023 ROE would have been 11.3%. Again, meeting what we call the higher end of the target that we would set ourselves. Most of you are asking, what's the path effectively for 2024 being the last year? I'm well recognized that we committed 11.5%-12.5% as our ROE target for 2024 under strategic plan. We are being honest that we believe that we'll probably fall at the lower end of that target. In our guidance later, I'll show more. We are projecting or targeting effectively an ROE of 11%-11.5%.
In theory, we need to drive effectively our ROE by another 30- 80 basis points. How are we going to deliver that? One, of course, continued BAU profitability from asset growth. Really it's all about NIM recovery this year. I think this whole effort that we are making to enhance our CASA franchise is all about driving NIM recovery, lowering our cost of deposit. Obviously, we will still hope for NOI expansion and wealth segment growth. The big driver for 2024 is all about our NIM recovery. Next, I think, we need to actually mitigate our cost escalation. We fully recognize that in 2023, because of the cost inflation and technology investment, the cost is simply high. We want to actually deliver in 2024 positive jaws through what we call cost containment strategy. Where is all this coming from?
I think we can basically look for the year ahead, is really we expect higher contribution from Niaga, as well as CIMB Singapore. Niaga, effectively, we delivered our 10.7% ROE with Niaga revenue being relatively flat in the year. That's because they are also facing a NIM compression in Indonesian market. We feel that can be addressed in 2024, or at least partially addressed in 2024. We expect revenue growth coming back basically from Niaga, which we can sustain our credit cost in Niaga will drive what we call bottom line increase. The other part that I have to say, when we embark on Forward23+, we didn't expect this, is that our transformation of CIMB Singapore has been very strong. Very spectacular, if I were to say. CIMB Singapore now has become one of the biggest contributor in terms of profitability growth.
That's really driven by, of course, I think the economic environment is positive in terms of there's a lot of excess liquidity in Singapore that help to really drive down the, I call it, help improve the NIM. More importantly, I think we are executing very well in Singapore. If you look at our CASA growth, we are 20% growth in CASA, really driven by what we call the consumer side as well as the commercial side, by targeting effectively commercial SME as well as business banking customers in Singapore. Of course, we had to offer more competitive pricing on the rates, but we've been able to actually target it. The other real success in Singapore has been driving CASA through retail for people who are interested on the Malaysia-Singapore corridor. The third element, of course, is coming from our FIKRALab operation.
That, we expect our CIMB Singapore to be a significant contributor in 2024 in terms of growth. The fourth part effectively is really about digital asset turnaround. As mentioned, CIMB Bank Philippines have broken even. We expect it to record now what we call profits, in 2024. I think momentum is good, really now become truly a bank, meaning in terms of with the right cost-to-income ratio, the right basically generating positive ROE. One element is CIMB Philippines. The second element is that we expect narrowing of losses from Touch 'n Go Digital. I think we have now come to what I call a real market leading position within the eWallet space. We expect that to be able to drive down basically the path towards profitability and sustainability. We expect significant reduction for the year in terms of the burn rate, effectively, of CIMB digital asset.
One element that, while we are relatively confident that we got approval to actually now to charge any credit card transfer between credit card and the eWallet. That really is one of the major, what we call cost element that we had to actually incur, where we are not able to actually charge fees for this type of transfer. On the credit cost side, it's got to be sustained. We don't expect that it's going to be a delta, basically growth, on credit cost. I think it's really important for us to sustain within the level that we have been able to actually deliver. Last, as I mentioned, I think Khairul and I mentioned, I think we will continue to explore capital optimization, to be a driver effectively to improve the ROE. Last, before I conclude, is really about sustainability.
Very happy to report under our S&P CSA, we have been rated, I think, 88, top 12. 88 means basically it is the top 12% of financial institutions globally. This really surpassed our 2022 achievement of being a top 20%. I think really we have been able to drive through, in terms of our sustainable finance target. If you look at it, we have tripled our original target, MYR 30 billion to MYR 100 billion. This target is supposed to deliver in 2024. This year- to- date, as at end of 2023, we already delivered MYR 87 billion. We do expect that we should be able to exceed the MYR 100 billion mark at the end of 2024. Just to share with you some of the key highlights. I think we are very proud to be able to publish our path to net zero.
This is a paper that really outlined the approach in terms of our 2030 net zero targets, as well as high-level transition strategies for selected carbon intensive sectors with palm oil that we came up with, power, coal, and cement. This, for your information, contributes half of our current finance emissions. We are also very proud that we are the first global bank to unveil a science-based net zero decarbonization target for our palm oil portfolio. Also, I think we have been able to also launch Malaysia's first comprehensive sustainability-linked financing proposition for SME. Just for your information, in terms of our target, we target to reduce our palm oil and power portfolio emission intensity by 16% and 38% respectively by 2030. It is an ambitious target, but we have a clear roadmap on how to actually deliver this over the next six years.
In conclusion, I think we are happy to report that we met virtually all of our 2023 targets, save cost-to-income ratio, and it is really driven by our NOI. We are cautiously optimistic of positive financial performance, but we are cognizant of the uncertainty within the macroeconomic environment, and we will remain, what we call, vigilant. In terms of target that we basically put ourselves in 2024, we are putting what we call a stretch target to deliver ROE between 11%-11.5%. In terms of dividend payout ratio, we will maintain, effectively, our plan is to maintain the 55% level, but continue to look at capital optimization. Loan growth between 5%-7%. Our cost-to-income, we want to bring it down from the 46.9% in 2023. We like to deliver a positive jaws. loan loss charge, I think that is very sustainable.
We are targeting 30 - 40 basis points depending on the environment of that. In terms of CET1 ratio, we are not changing it. I think we believe anything above 13.5% effectively is acceptable, but of course, this is subject to regulatory oversight as well as macroeconomic environment. That is where we are today. I am very happy to take any question that you may have. Thank you.
Thank you, Dato' 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. The first question, Dato', comes from Ben, from Macquarie. Ben?
Hi. Good evening. Thanks for the presentation, and well done on a good set of results. I guess the first question I have to ask is about the dividend payout. Just want to understand whether you think it's possible for you to hit this kind of a 65% effective payout, going forward, with the special dividend. How we should think about your CET1 trajectory wise? Do you think you want to try and cap it at around this 14.5% level? Obviously, as you go into next year, Basel III adoption's around the corner. Do you think 14.5% is a comfortable level with that coming in 2025?
Thank you, Ben, for that question. In terms of on a BAU basis, right, if you look at our trajectory of growth and also in terms of our internal capital generation, given the improving profitability across our geographies, we think that a BAU 55% payout is sustainable to maintain either a stable CET1 going forward or potentially slightly growing a bit, from that 14.5% of CET1 ratio. I think what is the biggest question is whether do we have an opportunity to optimize that 14.5% to something that is slightly lower. Again, that one is something that we're going to explore through the year. Like what Dato' mentioned, I think we do have that opportunity, but it is really subject to regulatory approvals, and also dependent on how the macroeconomic backdrop and the outlook on the macroeconomic backdrop.
To your last point in terms of Basel III, in terms of the standardized approach impact, the good thing is that Bank Negara has come out with the calendar in terms of publishing the guideline. Number one is the fact that they are delaying it by one year, so they're going to publish the guideline in 2026. Secondly, based on our high level calculation in terms of the impact, it is fairly manageable.
Okay. Thanks for that. My next question is a short one. What's your NIM guidance for 2024? Maybe, you mentioned that there's some bonds moving that number around. Would you maybe want to normalize your NIM guidance for that? What's the underlying NIM guidance here?
Yeah. I think from a reported basis, our NIM guidance for the group is stable to +5 basis points. If you've seen Niaga is guiding 4.2-4.4 basis points, so they're looking at stable to a contraction of - 20 basis points on a year-on-year average basis. Malaysia, we are also looking at stable to +5 basis points on a reported basis. We do see some path in terms of recovery, especially coming from the fourth quarter NIM number, both in Malaysia and also Indonesia, mainly due to the seasonal impact. Also in terms of the deposit side, from on an underlying basis, we do see some potential scope of improvement in terms of lower deposit rates, both in Indonesia and also Malaysia. We did that already in January, where we cut deposit rates by 5 basis points in terms of our campaign.
We are looking at further cutting next month. Of course, we hope that the industry will move towards that direction as well. In terms of the breakdown between the T&M and banking book, I think once we will explore disclosing that, and once we do that, and if we do that's when we can give you a bit more color in terms of on an underlying basis on the banking book versus the T&M book.
Okay, thanks. I just want to clarify something. I think your peers are guiding for some margin compression this year. It's order anywhere, from low single digit to 5 basis points. Could you maybe just elaborate a bit on what gives you that view that Malaysia, you can expand your NIMs by about 5 basis points? What's driving that?
On this, on Malaysia, I think there are two parts of it. One, I think we continue to try to actually moderate down further our cost of deposit and our, what we call trending, effectively, on the first quarter seems in the right trajectory. The other part that I think, because obviously NIM is a combination of also the asset side of the situation. We have decided not to, what we call trade, go for what we call volume, loan growth, vis-a-vis the asset yield side. On our side, I think we are taking the position, we will rely on our sales machinery to defend our market share, but we would not want to go to what we call the very low levels, in our perspective, low levels of loan rates, particularly in the retail side in Malaysia.
Similarly, I think on the corporate side, we do not intend to actually compete effectively in terms of pricing, meaning that lend at what we call a negative return. I think these are the part of the two strategy. I think it's a reflection of different strategies being adopted by different banks. We're not sure. Of course, if you can grow your volume bigger than your NIM compression, you still will have a NII expansion. On our side, I think we are taking the position that we are focusing on NIM recovery rather than trading on loan growth, or effectively loan growth, and just continue to drive our CASA to drive cost of deposit lower.
I think just to add, that gives us two things, right? One is the opportunity to our liability also will give some potential NIM expansion, where we can set off some of the higher costs of liabilities, and that's both in Indonesia and also Malaysia. Secondly, specific to Malaysia, when Dato' mentioned in terms of the lower yielding asset, because when we look at it from a real RAROC perspective, which of course results in ROE, we see that at this pricing point, it is more ROE accretive to walk away on some of those really competitive pricing.
Okay, thanks. That's very clear. I suppose, costs, it will be a big factor that gives you some flexibility to walk away from volumes. What's your guidance for cost growth, for 2024?
Just to be very clear, in our summary slide, we're targeting a positive jaws. For costs, we're looking at slightly higher than the mid-single digits of level.
Okay, thanks. That's all my questions. Thank you.
Thanks, Ben. Our next question comes from Akash, UBS. Akash?
Great. Thank you. Thanks, Khairul. Thanks, Dato. Congratulations on a good result, and very commendable progress so far. I have four, five questions, very quick ones. The first one is just on the non-interest income. You did mention, I think firstly, in the Q4, which is usually seasonally a weaker quarter, you saw a pretty decent Qo Q growth. I think you mentioned there were several parts to it. There was some lumpy recognition on the wholesale book. There was something on the consumer side. There was also NPL sales. If you could just help us understand a little bit more clearly what the different components were, and which are more sustainable versus very one-off in nature for Q4, on the non-interest income side.
On a sequential Qo Q basis, because of the lumpy fees on the recognition on the consumer side, and also because on the wholesale side is deal-related. On a sequential basis, you might see potentially some weakness. For overall, on a year-on-year basis, if you look at the underlying fee income on consumer and also on the wholesale side, we are relatively optimistic in terms of recording a good growth on a year-on-year basis. The other component is obviously on trading. That still remains a big question mark, but so far that is looking okay. We did end the year at a relatively high level, and we are looking so far, it looks to be quite sustainable. The bigger part, I guess, is in terms of other income.
Again, this is on a sequential basis, can be quite volatile, depending on the closure of some of the NPL sale pipeline that we are looking at.
If I were to take out those lumpy consumer items and the wholesale deals, then it would have been flattish to slightly down on a Qo Q basis?
On a Qo Q basis, I don't think that we should take that out, right? Especially both on the consumer and the GWB side, because those are underlying business-related fees. They're not one-off, right? It's just that the recognition comes through in the fourth quarter. We've been working on, for example, the GWB, we've been working on those deals for quite a while, and that materialized in the fourth quarter. The consumer fees is really a recognition of the period where we recognize that during the fourth quarter because of how we recognize some of those fees on the credit card. It's really reflecting the underlying business itself. We do expect growth going into 2024, right? It is an underlying growth in terms of the business.
To answer your question, specifically, which I think we shouldn't exclude, you would see, I think, in terms of the fee income to be broadly flattish Qo Q. Again, just to reiterate, we shouldn't exclude this fees from the underlying.
Understood. Great. Thank you. The second one is just on credit costs. You have 30- 40 basis point guidance for 2024. Is that just mainly BAU, or are you looking at building up the coverage, furthermore, from the 97% level?
On our side, of course, I think the Loan Loss Coverage is what we call, we use it as a matrix to see how resilient we are going forward. I think we intend to achieve 90%- 100%. Our biggest driver of Loan Loss Coverage is really about GIL, about gross impaired loan ratio. We think the credit costs effectively already hit what we call a normalized level. Of course, we would like to continue to optimize them, but the driver for Loan Loss Coverage is really about reducing gross impaired loans. You can see we actually reduced it from 3.3% to 2.7%. I think we have aggressive target to drive down that further. This is just basically looking at our impaired, what can we do with it, making sure that inflows basically is less than the outflows.
Outflows, of course, is to charge off through NPL sale, and all that. I think we now have gotten better grip in terms of this number. Each country, each BU have a clear plan on how to drive down this further. We think the LLC or Loan Loss Coverage, less of the credit cost. Credit cost, I think basically is normalized further. Really, I think the Loan Loss Coverage, we can hit at 90%- 100% is something that we would like to actually keep, to make sure that we are resilient going forward.
Thanks for th at. Do you have still any overlays or buffers left which you can help to support the provision requirement for FY 2024?
Yes, we do. As we mentioned, basically, I think we delivered the result without significant release on the so-called overlay, in 2024. Accounting-wise, overlay has to make, what we call, permanent, right? Generally, we'll focus on reallocating the overlay back into our model. There could well be some, I call it, positive impact. Our focus is really to reallocate the overlay into effectively our permanent model for that. I guess, as I said, we keep to this level of loan loss coverage. To tell you the truth, I feel I'm not being what I call, wrong to say this, but we could deliver much higher ROE this year if we just took the aggressive position to actually to release overlay.
We decided that that's not the way we wanted to basically to make sure, underlying-wise, we remain, I call it, solid, resilient, basically for any issues going forward. Yeah. The plan is to reallocate overlay into our models going forward. If there may be some writeback, effectively it's much more to make sure that the thinking behind the model effectively is valid and defendable.
Okay. Got it. Thank you. The third question is just on the loan growth. I was hoping to understand what are the major drivers of the loan growth for FY 2024 that you're thinking about? What are the opportunities that you're looking at in the market? What would be an upside and downside risk to that 5%-7% target that you've set for yourself?
To tell the truth, just to cover back the point I was saying, we see demand to be not a constraint. I think a lot of my colleagues within the banking have announced demand has been, I would call it, pretty solid. Of course, Malaysia economic growth is good. Even Indonesia, basically, there has been positive. I don't think it's what we call the constraining factor. We have put in a lower loan growth target predominantly because of the liability side. We do not want to put what we call is under pressure, by virtue of effectively on growing loan too aggressively. As I said, our strategy is really about NIM recovery this year.
That's the reason why we are forecasting a lower loan growth number. I think we have taken the decision not to, I call it, to lend if we're going to lose money for it. Generally, I think that's the principle that we do. We know there is some risk, meaning that, whether there's a likelihood that we will lose some market share in terms of the mortgage side of the business, particularly. As I said, we will trust our sales machinery, to make sure that we are able to maintain our market share, even though our pricing basically is slightly higher than market.
Yeah. Within that number, Akash, that 5.7%, of course, you saw Niaga's guidance, which is 5%-7% as well. I think it's important to highlight that within that number, Malaysia, we're looking to grow at about 5% sort of level. Broadly, in line with industry, not taking any market share.
Okay. Got it. Just the last very quick question. You mentioned about BNM publishing a guideline in 2026 for Basel III. I thought the implementation was in 2025, right?
Yeah, based on the calendar of the Bank Negara regulatory guidelines, the calendar that they're going to do, it looks like based on that calendar, that it's only going to be implemented on 1st of January 2026.
Oh, I see. Okay. Thanks. Just very lastly, any updates on Dato's plans to stay with CIMB or leave as reported by the media?
Obviously, I'm conscious there are rumors, speculation in the market. You know our policy is not to comment on any of these rumors. Akash, I'm focused with the team, to really execute on the Forward23+ strategy. If I can leave it to that, as I said, I will focus really to continue to progress on the initiative that we have on this.
Okay, fantastic. I think that'll be a great outcome for shareholders. Thank you very much, Dato' and Khairul. All the best.
Thanks, Akash. Next question we have is from Peter Kong. Peter?
Yeah. Hi, Dato' and Khairul Rifaie. Just two questions from me. Actually, the first one is just adding more color to the questions already asked on credit costs. I note that, from 32 basis points you closed this year, you actually gave a wider range of 30%-40% in 2024. I bring it up because some of your peers are actually trying to say that now in 2024, they could improve this a little bit more. I'm just trying to understand whether in 2023, were there very significant lumpy recoveries that maybe you think that it may be difficult to replicate, and that's why credit costs could have a chance to go up to the 40s. Otherwise, I can see that your business BAU, will be doing closer to 30% than 40%, right? Just wanted to understand, were there something lumpy that we take cognizance of?
Of course, there are recoveries, number effectively within the ECL, Peter, on that, particularly from Singapore. I think there's been a number of recoveries that we've been, I call it, recording, both in 2022 and 2023. We are just cognizant that whether those recoveries can continue to actually recover. As I said, we give a bigger range not because of anything, because I think we are trying to be probably conservative in terms of our forecast. We, at the moment, do not see what we call blowouts or potential risk of effectively a blowout. I guess we just wanted to be conservative to have, what we call, a wider range just in case, if there's any issue specifically there. The only, I guess, risk, and you can see in the numbers, is Thai top-up provision that we did. We think that we have done the bulk of it.
Thai market or retail market is a bit unique in the sense that if you want to accelerate your GIL, you may need to actually to sell the NPLs basically faster. I think probably that's one, probably risk area that I think we need to actually to factor in. Generally, this, I call it large portfolio, so it's not what we call, episodic event that basically that will create what we call a large increase.
Okay. Thanks. My last question is relating to CIR, because I think your Forward23+, initially, you wanted to bring it below 45%, but, for FY 2024 guidance, I still see it's 46.9%, meaning to say income and expenses will grow somewhat in line. On page 16, I also noticed that, like for example, this year, technology spend was not as much as initially planned or committed. I was just trying to understand how much flexibility you see yourself having moving into 2024 into what you need to spend and what you absolutely have to, and what you can actually have a little bit of a leeway to delay that, right? I want to get some idea on those last items.
Yeah. Just one thing about, obviously, I think that our target effectively 2024, is higher than our original Forward23+ target of 45%. The big driver out of it that we didn't factor in have to be on the cost inflation, particularly on the personal cost, particularly on the collective bargaining, effectively in Malaysia and the cost obviously also in Singapore, because obviously inflation is basically very strong. These are the two main driver. Of course, revenue didn't grow as what we anticipated to grow because of the NIM compression. That's the reason why we are likely not to be able to hit the 45% mark. On the collective bargaining, we are entering into another cycle, because you recall what was settled was during the COVID period.
I think we are just cautious on the impact of this. As you know, it had a material impact to all local banks in Malaysia. That, I think, is the bigger issue. I think peak cost inflation is one thing that we need to actually be cautious on. I think what we want to do in 2024 is really to drive positive jaws. As you know, in 2023, I think we had a slightly marginal negative jaws. I think we want to reverse that, and we want to actually to have that, which is why our target is below the level that we had in 2023.
I think if you look at as an industry, I think, basically, one slide that I shared earlier, is really about you can look at this issue is not just us. I think the whole industry is facing this challenge. We try to actually to do it probably easier on the wholesale side. As you know, we did a restructuring exercise in the wholesale side in last year, which is part of the reason why costs also got a big increase because of the one-off restructuring cost that we took. This year, if there's none, then obviously we have a opportunity to reduce cost. As I said, in Malaysia, I think the challenges is really all about managing peak costs.
Okay. Thank you. I'll send back to the queue.
Thanks, Peter. The next question we have is from Yong Hong from Citi. Yong Hong?
Hi. Thanks, management. Maybe just three quick questions. Firstly, just want to clarify, the NIM guidance is from 2.15%, or is that from 2.22%?
That's from on a year-on-year basis. It's on a year-on-year basis, the NIM guidance is stable to +5 basis points .
Okay.
From the 2.22% level.
Okay, got it. You mentioned sequentially, that will be driven by funding cost optimization.
Yes.
Okay, got it.
From sequential basis, so from that 2.15 basis points in the fourth quarter, right? The main driver of NIM is mainly on the cost of funding side, and that's both driven by the seasonal impact of the fourth quarter normalizing and also, from the deposit drive in terms of cutting the rates, the impact coming through in the first quarter of this year.
the swap, right? If we are able to grow our deposit cost better, we'll be able to swap the expensive SDMMD and repo effectively in our part. That's the strategy, what's going to drive the NIM recovery.
Okay, got it. On capital, I think, the credit risks RWA dropped sequentially, but there was some loan scope, which probably is the capital optimization that you mentioned. Is there any guidance on the quantum that you can do for this year?
In terms of capital, in terms of RWA, right? RWA optimization for 2024, we don't expect it to be that material. We had some lumpy implementation in the fourth quarter. If you look at it from a total year perspective, from our RWA base for 2023 itself over the year, it wasn't that significant. Of course, over the quarter, that was fairly significant. We do expect this BAUs of RWA optimization rollout, further enhanced models to continue, but it wouldn't be a big driver of reducing our RWA density from a year-on-year perspective.
Okay. Got it. Thank you. Maybe just one more question. I think it's on capital allocation. It appears that the profitable business in Thailand is the wholesale segment, and I think retail probably provide the funding base. Just want to understand from a group ROE and capital allocation perspective, is there anything that you can manage or do for this segment?
Yeah, I think that's a good spot, specifically on that. Obviously, our wholesale, I mean, the weak performance on Thailand really masks the strong performance on the wholesale side, particularly corporate banking and FIG. Obviously, our challenge is on the retail side, on that, particularly, on two fronts. One is the top-up provision that we needed to do. Second is really on our auto financing business. We are embarking upon what we call a turnaround plan for the auto business. The market itself is challenging, because there is a cap rate introduced by the regulator, cap interest rate rule, basically, introduced by the regulator, as well as the general challenging, I call it, economic environment in Thailand. Our focus is really to turnaround, effectively, the business.
Strategically, and I think probably we'll cover that in our beyond 2023 plus strategic plan, I think we will ask ourselves tough questions, right? How, in terms of capital allocation, we want to move forward in terms of capital allocation for the retail side. The good thing about retail side, at least what we call the wealth income, and the preferred segment in Thailand, is doing pretty well. They are the biggest distributor of retail bonds in Thailand. That's something that I think we believe there is a lot of value in. Obviously, I think we need to tackle the issue on the auto finance business side.
We got it. Thank you.
Just a reminder, if you have any further questions, please put up a hand, and if possible, could you please identify your name and company in the app as well, please, so that we can identify you. Thank you. I think that's all the questions we have for now, Dato'. I think we can call the meeting to an end.
Yeah, I'd just like to thank all of you again, I think, for staying late, and we look forward, I think, over the next course of a week, I think we will probably meet up with some of you to actually go through this in further detail. If you have any further questions, please reach out to Steven, Khairul. Sorry, another question.
Can we take one more question?
Yeah, sure.
You don't mind? Hi, there's one question from [Zixuan]. Are you on the line, [Zixuan]? Sorry. Quick question.
Yeah.
Sorry, I think he has left the call.
Oh, okay. With that, thank you very much, everyone, basically for joining us today. Look forward, basically, seeing you basically in the next-
Thank you.
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. Thanks.