The Three Numbers That Bolster CIMB Group Holdings Berhad

Malaysia has more than its fair share of banks. CIMB Group Holdings Berhad (1023.KL; KLSE: CIMB), whose history can be traced back to Kuching in 1924, is its many financial institutions.

CIMB, which is an abbreviation of Commerce International Merchant Banks, is one of the world’s largest Islamic banks. Last year, it reported a Return on Equity (RoE) of 6.7%, which was below those of peers Malayan Banking Berhad (1155.KL; KLSE: MAYBANK) and Public Bank Berhad (1295.KL; KLSE: PBBANK).

The lower RoE can be traced to a modest Net Income Margin of 21.7%. It means that CIMB only generated MYR21.70 of bottom-line profit on every MYR100 of sales. By comparison, Malayan Banking Berhad Net Income Margin was 35.5%.

CIMB’s Asset Turnover was not too dissimilar to its peers, though. It generated MYR2.90 of revenues on every MYR100 of assets at its disposal. Its Asset Turnover is also in line with Singapore banks, which include DBS Group (SGX: D05), UOB (SGX: U11) and OCBC (SGX: O39).

In common with other banks, CIMB makes use of leverage. That is, after all, how a bank makes money. Its Leverage Ratio was 10.9.

By dismantling CIMB’s Return on Equity, it is easier to understand what is going on at the company. Its RoE of 6.7% is the product of a modest Net Income Margin of 21.7%; a low Asset Turnover of 0.029 and a decent amount of Leverage Ratio of 10.8.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.