CIMB Group Holdings Berhad ($CIMB)

Good afternoon, ladies and gentlemen, and welcome to CIMB Group's financial results briefing for the first quarter of 2026. Our host today is CIMB Group CEO, Novan Amirudin; and Group CFSO, Khairul Rifaie. My name is Steven from the CIMB IR team. You should have received the latest analyst presentation and financial statements by e-mail from CIMB Group Investor Relations. Otherwise, you may find the documents in the IR section of our website at cimb.com. Please be informed that this briefing is being recorded. Also please include your name and company on the Teams app to allow us to identify you. [Operator Instructions] At this juncture, I would like to hand over the briefing to Novan and Khairul. Novan, over to you. Thank you, Steven.

So it's been a resilient first quarter '26 performance for CIMB Group despite the various headwinds that we saw, whether it is on the geopolitical side or even on FX. If you look at the table on the left-hand side, the year-on-year impact on FX to our group as a result of the depreciating currencies in ASEAN, for example, Indonesian rupiah and Thai baht vis-a-vis the ringgit has led to about a 5% impact to our group. Nonetheless, despite all these headwinds, I'm pleased to announce that it has been a resilient first quarter for us. Operating income is flat at MYR 5.4 billion when we compare quarter-on-quarter. And the reason for this resilient performance despite the headwinds that we saw, especially on FX as well as the geopolitics are basically the strong performance in NOII. If you look at the table on the left, NOII saw 11.9% quarter-on-quarter increase from MYR 1.5 billion last quarter to MYR 1.7 billion this year. And this is really driven from both an increase in our fees and commissions by 4% quarter-on-quarter as well as trading and FX that increased 17.5% quarter-on-quarter. With regards to trading and FX itself, we saw both increases in terms of our Trading business as well as our treasury client sales in which we will discuss further later. On the NII side, there was a quarter-on-quarter decline of about 5% year-on-year, 3.6%. But if we look at it on a constant currency basis, it actually grew by 1.4%. This decline was as a result of a compression in NIM for the group of about 2 basis points, but we actually saw expansion in Malaysia, Singapore and Thailand. So the compression of 2 basis points was as a result of our business in Indonesia. Nonetheless, with what we are seeing today, Malaysia, Singapore, Thailand has seen expansion. There is a 50 basis points hike in Indonesia that recently got announced. Based on the current economic situations in each of the markets that we operate in, we are expecting this NIM compression to bottom out. With regards to our asset growth, whether it is in securities or loans, the pipeline remains strong. And we also saw a decent healthy growth in the first quarter. Asset and loans grew 1.1% to 1.3% quarter-on-quarter on a constant currency basis. But more importantly, if you zoom into some of the respective markets, Malaysia, for example, saw loans growth of 5.9% and Singapore seeing loans growth of 3.5%. So when we look at the overall first quarter performance when it comes to income, we see very strong NOII, we see NII despite being challenged in the first quarter due to NIM compression, that NIM compression is bottoming out, and we're seeing early signs of that already. But more importantly, the asset and loan growth to power this NII growth is still growing healthily, and we continue to see a strong pipeline. Moving down the profit and loss to our operating expenses. I think this is one area where the group has been relentless on becoming simpler, better and faster throughout the group as part of Forward30. And this cost discipline is showing. I'm pleased to announce that our OpEx actually declined by 5.5% quarter-on-quarter and even 2.6% year-on-year. This led to our CIR improving to 47.2% but this is not at the expense of our investments in technology. That is something that we continue to do with our tech CIR at 8.2% within our 8% to 9% guidance. Moving now to asset quality. Despite the current headwinds that we're seeing, asset quality continued to remain strong. GIL maintains at 1.7%, same level as fourth quarter last year, first quarter '25 was actually 2.2%. So asset quality continued to remain strong. We do have a limited direct exposure to the Middle East while we continue to assess potential second order impacts to our group. At the moment, I think we are very comfortable. We run a lot of scenario analysis on what the potential second or even third order impacts would be. But at this point in time, our portfolio remains strong. Lastly, on capital, this remained robust with CET1 at 14.3%. This is a very important part of Forward30. We continue to be very disciplined with our capital allocation. You saw that in November last year when we announced the capital return program. You saw that just a few weeks ago when we announced the divestment of our CIMB Thai Auto Loan business. And we continue to be disciplined with regards to capital allocation, and we're very, very firm about not growing at all costs. There have been some M&A opportunities that we have evaluated. We always evaluate opportunities but we are very disciplined in terms of ensuring that we only will invest and grow at the right price. And this is a discipline that we continue to have. Next page, please. So a recap of our Forward30 strategic plan anchored on our purpose of advancing customers and society. It's all about the 4Cs. So our capital and resources where we continue to reallocate to grow. You saw that when we announced the capital plan, you saw that when we did the divestment of Thai Auto business. Our second C, cash, all about building a strong deposit franchise to reduce cost of funds. Our third C, cross-sell, all about increasing returns. You saw the strong performance in NOII and the fourth C, capabilities, just becoming simpler, better and faster. And you saw that in the reduction of our operating expenses, which led to an improvement of our cost-to-income ratio. Next page, please. I will now take you through an update on the key areas that we have put on with regards to each of the 4Cs in the first quarter. On the capital side, as I mentioned earlier as well as we presented during the announcement of the divestment of the Thai Auto Loan portfolio. We continue with our transformational change to win in Thailand. You saw us exiting that non-core, sub-scale business. There is an operating model change to sharpen our focus towards wealth and wholesale. The sales proceeds that we get from selling this portfolio will be used to repay high funding costs in Thailand. Part of it will be used to grow the Wealth and Wholesale segments in Thailand. And the balance, and we budget this to be about THB 11 billion worth of capital to be returned to the group. With regards to innovation, we are currently in a pilot together with SC and Bursa Malaysia to come up with investment options for Shariah-compliant investors to participate in the Malaysian banking sector. This is something that we are working on and hopefully, we can launch pretty soon. Second C, with regards to cash, the whole focus on deposit franchise and deposit-led strategy has allowed us to reduce our cost of funds, 44 basis points year-on-year and 7 basis points reduction quarter-on-quarter, which then allowed us to sort of defend our NIM to such to only a 2 basis points compression. And this is really coming from our strong growth in deposits as well as our reduction in LDR. If you look at the chart on the right-hand side, this is to show to you why we are confident that we are seeing signs of NIM bottoming out. I mean if you look at the markets of Malaysia, Singapore and Thailand, it has certainly bottomed out from the third quarter of last year, and it continued to expand in the first quarter this year. We are also seeing similar trends or early signals of similar trends of this in Indonesia. Next page, please. Our third C, cross-sell. This is something that we continue to push as evident in the growth in the NOII in the first quarter. Fee and commission income is up 4% quarter-on-quarter. Treasury client sales continue to increase. It was up 1% quarter-on-quarter and 2.2% year-on-year. Our wealth AUM year-on-year continued to increase and our number of wealth customers backing up this wealth AUM is also increasing. We also, during the quarter, announced a strategic partnership with Ant International, who are our partners in Touch n Go today, where we are working on innovations with regards to cross-border payments as well as treasury and liquidity management solutions. This is something that we're quite excited about to announce to the market when this is ready. Our fourth C with regards to capabilities, we are relentless on becoming simpler, better, faster. And therefore, this is clear in the reduction of our overhead expenses, which then led to a reduction in our cost-to-income ratio, but not at the expense of investments in technology and data. This continue to be within the 8% to 9% guidance that we've been providing every year. With that, I will now hand it over to Khairul to dive deeper into our financial performance. Over to you, Khairul.

Thank you, Novan, and good afternoon. Key highlights of first quarter on Slide 8, some 3 additional points to what was already presented. Firstly, if you look at the robust trading and FX component, has really driven our NOII proportion to total income significantly during the quarter, expanded to 31.9%. Secondly, if you look at the PBT performance, of course, [ of our P&L ] has been impacted by the FX translation. Excluding the FX impact on a constant currency basis, our PBT grew on a year-on-year basis by 1.6% growth. Lastly, on this slide, if you look at the loan loss charge record number in terms of 31 basis points what we recorded in the first quarter, that is well within our guidance of 25 to 35 basis points. Next slide, on Slide 9 in terms of the key business highlights. As [indiscernible] highlighted earlier, we reported strong underlying performance. If you look at it from a PPOP constant currency basis, that grew very well Q-on-Q and also year-on-year. Within that number, you can see Indonesia and Singapore growing well both on PPOP and also operating income growing at 8.1% and 5.9%, respectively, on a year-on-year basis. If we then also break it down between the 2 P&L lines, you can see NII growing at 1.4% year-on-year. Similarly, NOII recording a stronger growth at 8.4% year-on-year. Given the very strong cost discipline that we have executed in the first quarter, this gave us a very good operating leverage, driving that year-on-year PPOP growth of 2.7% year-on-year on a constant currency basis. Moving on to the highlights on segment by PBT on Slide 10. Firstly, on consumer. The Q-on-Q growth was impacted in terms of the NIM pressure coming out from the loan and also the very strong FTE growth. Another impact is that during the fourth quarter last year, we had a writeback related to MEF and also overlays. However, if you look at it from a wealth perspective, that remains strong during the first quarter, and that also drove a very good NOII growth, both on a Q-on-Q and year-on-year basis. The year-on-year contraction in PBT also to a certain extent, is also driven by the same factor on a Q-on-Q basis, and that is the writeback that we recorded last year -- during the first quarter last year related to a model enhancement. Wholesale Banking, a very good top line growth during the quarter, driving a very strong PPOP growth of about 10%. However, last quarter, we had some write-back coming through in Indonesia. So the absence of that driving the Q-on-Q PBT lower. Similarly, on a year-on-year basis, we also had a very higher write-back coming through from Indonesia in the first quarter of last year. In addition to that, the year-on-year performance was slightly impacted by a moderate top line for Wholesale Banking. Commercial Banking, both Q-on-Q and year-on-year was driven by the current year first quarter write-back on ECL coming through from Malaysia and Indonesia. There is a recovery that came through, a reflection of the asset quality and our recovery efforts. One point on the year-on-year, apart from the ECL write-back that was recorded this year, NIM was improved on a year-on-year basis given the strong CASA growth that we recorded of around 10% year-on-year. CDA and group funding, overall, Touch n Go Digital and Touch n Go continued its strong performance during the first quarter. However, during the -- on a Q-on-Q sequential basis, the PBT was impacted due to the write-back on bonuses that we recorded during the fourth quarter. So the absence of that impacted the PBT performance. Moving on to Slide 11. Firstly, on Malaysia, very good NIMs is what you saw in terms of the trajectory for Malaysia, both year-on-year and Q-on-Q. That drove Malaysia's NII by 5.4% year-on-year. However, within the Malaysia context, trading and FX was down year-on-year and Q-on-Q. And in the fourth quarter last year as well, we had some lumpy other income. I think it's important to highlight here in terms of Malaysia's performance, credit costs for Malaysia was flattish, both on a Q-on-Q and year-on-year basis. Singapore, very strong underlying and robust growth. PPOP grew by 6% year-on-year, driven by both wealth and also strong treasury and markets. However, last year, in the fourth quarter and in the first quarter, we had higher ECL recoveries and write-back. So in Indonesia, despite the challenges that we have in terms of the macro backdrop, driving slightly moderate or weaker growth in NIMs, fees and trading and FX was strong, so driving good PPOP growth on a Q-on-Q basis. On ECL, similar to Singapore, last year in first quarter and fourth quarter, the ECL had a higher write-back impacting the year-on-year PBT growth. Thailand, the transformation is ongoing and executing well. So we had costs coming down on a Q-on-Q and year-on-year basis. In addition to that, trading and FX was also strong, driven by the good markets driving the overall PBT performance, both Q-on-Q and year-on-year. On Slide 12, breakdown of the P&L on -- firstly, on NII. As what you saw earlier, you can see group NIMs really bottoming out. Just to explain in terms of the drivers for the Q-on-Q NIM performance. Malaysia, that slight expansion is really driven by cost of deposits coming down. And this is both driven by our CASA expanding significantly for the quarter and also some of the more expensive deposits that we took on 12-month deposits, more expensive 12-month deposit that was on our book last year coming off to a lower rate. In Indonesia, the contraction is driven by 2 things. One, there was some one-off adjustment that impacted the interest expense during the current quarter. In addition to that, some underlying pressure on loan yields. If you exclude some of the one-off adjustment, the contraction is significantly smaller than what is reported here. Thailand and Singapore, the same drivers of that margin expansion. This is really our optimization in terms of some of the more expensive deposits and with that also some of our expensive CASA campaigns. We ended some of that to optimize our NII. And you can see that later, some of the CASA growth are being impacted in Singapore and Thailand, and that was intentional. On a year-on-year variance on Malaysia, really our proactive and preemptive sort of strategy in terms of our liability management, helping us sustain the level of NIMs for Malaysia on a year-on-year basis, given the headwind that we had in July on the policy rate cut. In Indonesia, Singapore and Thailand, all 3 countries were heavily impacted in terms of the policy rate movements, therefore, driving that NIM contraction. In addition to that, in some of the markets, we did have a very high competition in terms of deposits, in particular, Indonesia, especially in the first half of last year, impacting the overall 12-month year-on-year number. Slide 13 on NOII. This is where you can see we had a very robust trading and FX number or achievement during the first quarter. In addition to that, if you look at the fees, that also grew quite well at 5.4% on Q-on-Q, driven by wealth in Malaysia and Indonesia. Breaking down the trading and FX, both client franchise and trading grew, but of course, the trading number is a lot higher in terms of the growth driver. On a year-on-year basis, the fees and other income, that's mainly driven by Singapore [ Banca. ] So that continued to be growing well. That's offset slightly by weaker fees in other business segment. On the trading and FX component, that's mainly driven by Indonesia, Singapore and Thailand, fully offsetting some weakness on the trading and FX in Malaysia. And breaking it down between the 2, both are growing well, both on the treasury client sales and also the trading component on a year-on-year basis. Slide 14 on OpEx, like what we mentioned, we exercised very strong cost controls, and that has driven cost to be lower Q-on-Q and also year-on-year. There is some seasonal impact coming through in the fourth quarter, and that drove some of the numbers lower. So if you look at marketing and admin in general, there were some catch-up in terms of the expenses during the fourth quarter. However, if you look at personnel expenses, we also had a fourth quarter write-back of bonuses. So the increase is really because of the absence of that write-back. If you normalize for all those seasonal factors on a Q-on-Q basis, the underlying OpEx is broadly stable that is MYR 2.5 billion level. On a year-on-year basis, a very good containment of costs, contracting by 1%. You can see personnel costs flattish. The lower growth in establishment and marketing is really the driver of our tactical cost saving into those 2 lines. Technology, we continue to invest, recording a flattish growth year-on-year. On Slide 15, on asset quality, this remains strong and stable. Firstly, in terms of the recoveries, this is lower Q-on-Q and also year-on-year. Firstly, we did have a higher recovery coming through in Indonesia for both first quarter 2025 and also fourth quarter 2025. Obviously, during the fourth quarter '25, the recovery coming through in Indonesia was a bit more significant. I would describe this quarter being more of a BAU level of recoveries, both on the non-retail and consumer has been fairly stable on a Q-on-Q basis in terms of recoveries and write-offs. In terms of the non-retail number, if you look at the fourth quarter last year and first quarter last year, we did put in some overlays. In the fourth quarter last year, it was related to corporate segment. In the first quarter last year, it was related to the trade war. So some overlays inflated a bit some of those numbers on the non-retail side. On retail, the number -- the increase on a year-on-year and Q-on-Q basis is really driven by the timing of some of our write-backs on overlays and MEF and reallocation of that. Just to highlight, in the first quarter of 2025, there was a model employment and that led to some write-backs coming through the first quarter 2025. You can see in terms of the gross impaired loans ratio that has remained stable, a very consistent improvement from last year. Loan loss charge at 31 basis points is well within our guidance of 25 to 35 basis points. Allowance coverage remains very well comfortably above 100%. I would like to also highlight here that in terms of our overlay, we have not yet made any new forms of overlay, in particular, coming through from the potential impact from the macro uncertainty coming up from the Middle Eastern tension. We have not done any of those new overlays in the first quarter of 2026. We are reviewing whether we are going to need or whether we're going to do any preemptive provisioning or overlays related to that in the second quarter or potentially third quarter. Slide 16 on total asset growth and debt securities. You can see in terms of total asset that is growing well on a constant currency basis. Driving that is debt securities in Malaysia growing at 1.8% Q-on-Q and also 6.9% year-on-year. Singapore contracted Q-on-Q, and that's driven by a significant maturity that came through during the quarter, and we have not yet deployed those -- the matured liquidity that we have gained and is still at the moment, sitting as cash and waiting for the right opportunity to deploy. On Slide 17, on gross loans, overall, this is driven by wholesale banking. If you recall, during our third quarter announcement, we did mention that our pipeline is strong, and that has come through in the fourth quarter and also in the first quarter. So there has been good momentum on wholesale banking over the past 2 quarters. The outlook as well, that still remains a fairly decent pipeline going forward. So you can see under wholesale banking, that 3% growth is driven by Malaysia, Thailand and Singapore. In Consumer Banking, that negative growth is mainly driven by Thailand and Indonesia, whereas in Malaysia and Singapore consumer, the growth has continued to be supportive. In Commercial Banking, that contraction Q-on-Q is mainly driven by Indonesia. So within the countries, if you look at Malaysia, that's driven by wholesale banking growing by 11% year-on-year and consumer banking growing at 4% year-on-year. Indonesia, GWP growing at 5% year-on-year. Singapore consumer growing very strongly, especially on wealth financing growing at 11% year-on-year, whereas Thailand, that negative growth is really given the backdrop of the environment on the Consumer segment. On deposit on Slide 19 (sic) [ 18, ] this is really about our good growth in terms of the underlying CASA, especially driven by wholesale banking. You can see in terms of the total CASA growth Q-on-Q and year-on-year, that remains good. Within the wholesale banking number, that CASA growth was 12.5% Q-on-Q. Some of it is short term, given the requirements of the -- our clients, and it is slightly and will likely come off in the coming quarters. However, it did benefit our cost of funding during the first quarter. Consumer banking within that negative number, it is intentional. [ But ] I mentioned earlier, this is optimizing our cost of funds in Singapore and Thailand related to some of the campaign CASA that we have. Within this number, Malaysia CASA grew well at 1.1% Q-on-Q. Commercial banking, although on a quarterly basis is weak, and that's typical during the first quarter for commercial banking. You can see on a year-on-year basis, the growth for deposit is strong, and that's driven by CASA in Malaysia and commercial banking growing at 10% year-on-year. So you can see the wholesale banking, CASA growth driving the CASA ratio expansion in Malaysia. The contraction in CASA ratio in Singapore is driven by our intention to optimize the CASA campaign rates in Singapore in consumer. On Slide 19, on capital. Our capital ratios remains very stable. We're still very -- our liquidity ratios all remain strong and stable or improving across the board. By segment, if you look at Consumer Banking, firstly, the contraction is really driven -- Q-on-Q is really driven by the margin contraction. [ NOII ] still remains good. Another partial offset is that cost controls remains very strong, and that drove our PPOP growth higher Q-on-Q. However, the ECL has picked up during the quarter because of the overlay write-back that we recorded in fourth quarter 2025. Similarly, year-on-year, ECL increased because of the ECL write-back related to the model deployment. In terms of loan growth, that's really driven by Malaysia growing at 4% year-on-year. In terms of deposits, CASA still remains good. Indonesia, CASA grew by 5.5% year-on-year. Malaysia CASA grew by 4% year-on-year. Commercial Banking on Slide 21, top line growth was fairly moderate Q-on-Q. However, if you look at the year-on-year number that I mentioned, the NIM did expand because of the strong CASA growth, especially in Malaysia. However, both on Q-on-Q and year-on-year, the [ NOII ] is down, driving that moderate or slightly weaker growth in terms of operating income. Where it remains strong is in terms of asset quality and the recoveries that we recorded in Indonesia and Malaysia during the first quarter this year drove the PBT growth overall. In terms of loans ex FX, that remain fairly moderate at 2.9% with Malaysia being fairly flattish year-on-year. In terms of deposits, very strong growth in terms of CASA. On Slide 22, on wholesale banking, we did record a very strong and robust Q-on-Q top line performance. However, because of the higher recoveries, both in the fourth quarter and also first quarter last year, that impacted the PBT growth overall. In terms of loan growth, like I mentioned earlier, Malaysia was very strong, growing at 11% year-on-year. Deposits really driven by CASA, especially in Malaysia and also to a certain extent, Indonesia. Digital assets and group funding on Slide 23, in terms of the PBT contraction Q-on-Q is really driven by the higher cost because of the accruals that we made for the write-back in terms of the bonuses that we recorded during the fourth quarter. So a normalization of that drove the PPOP being weaker overall. But in terms of the year-on-year performance, that is strong, driven by the lower ECL. Touch n Go Digital remains profitable since first quarter 2025, and the trajectory remains positive during the first quarter. We have now disclosed as well the total payment value in billions as a better reflection of the revenues. And you can see a very good growth and strong growth from the TPV, almost doubling coming out from the first quarter last year to the current number of MYR 76 billion. So the momentum is very positive for Touch n Go Digital. For CIMB Philippines, as what we highlighted, we are recalibrating some of our risk appetite in CIMB Philippines, and that has resulted in the loan book contracting by 11% year-on-year. However, in terms of the customer momentum, that still remains positive at about 11% growth year-on-year. Lastly, on Islamic on Slide 26, good growth, both on -- PBT, both on Q-on-Q and year-on-year. On a Q-on-Q basis, that's driven by lower OpEx and on a year-on-year basis, driven by some of the lower OpEx on the recoveries. On Islamic Financing, that continues to outpace the conventional side and is mainly driven by mortgages. In the Islamic Deposits space, apart from [indiscernible] CASA also grew strongly on Islamic at 15.6% year-on-year. So that's the end of the financials. Thank you, and I'll pass the presentation back to Novan for closing.

Thank you, Khairul. So in conclusion, we are maintaining our 2026 guidance despite the current volatilities observed in the first quarter. And the main reasons are we are seeing asset and loan growth continue to be resilient. There is a healthy pipeline that is being observed at the moment. We are seeing early signs of NIM compression for the group bottoming out. We're already seeing expansion, as I showed earlier, in Malaysia, Singapore and Thailand, and then we are seeing signs of Indonesia improving. In terms of cross-sell and trading income, this is the strongest part of the business. It's in very strong double-digit quarter-on-quarter growth, year-on-year growth, both in terms of business from our client franchise as well as from our own trading books. And lastly, we're going to be continuing to be relentless to be simpler, better, faster. We're exercising tremendous cost discipline throughout the group, as you saw in the declining cost numbers, while asset quality will be maintained. In terms of key risks that we face, firstly is FX headwinds. We are seeing currencies outside Malaysia relative to the ringgit depreciating in the -- over the last many months. We saw that from Indonesia. We saw that in Thailand, to some extent, Singapore vis-a-vis the ringgit. These headwinds will be cyclical, but it is cyclically impacting our consolidated earnings. The other case that we are observing very, very closely is the impact of rising inflation to our customers as well as to our own business as a result of the current dislocation in supply chain, increase in fuel prices and so on. But all-in-all, on balance, we are maintaining our 2026 guidance. So with that, I will end here and happy to take any questions that you may have.

Thank you, Novan and Khairul. [Operator Instructions] Our first question comes from Tushar from Nomura.

Firstly, I just wanted to ask, what are you seeing on the ground with regards to asset quality as it has now been a couple of months, prices have stayed high, there is some supply disruptions. While Malaysia still has a lot of subsidies, but some businesses have started to see higher diesel price, electricity costs, et cetera. So just wanted to ask for this 25 to 35 basis points credit cost guidance to hold. By when do we need to see some like real ceasefire reduction in things like oil prices, et cetera?

So Tushar, I think, just firstly, just to provide some context, right? Even from the very start of the conflict, we did multiple scenario analysis based on various assumptions on the macro backdrop. Some are relatively decent, but some are very conservative and very stressed. So we've done all those areas, and we looked at what are the probabilities of that. And in terms of on the ground itself, so far, even though a couple of months have passed and there are some pressure in terms of diesel price that we mentioned, we have not seen any signs of deterioration yet on the ground. Our [ R&R ] numbers are still fairly stable. Just to provide a bit more color from that perspective, we did see some delinquency rising on some consumer segment in March. And we did think that it was due to the seasonal impact for Eid or [ Riyadh. ] And that turns out to be true where we saw that improvement coming through in April. So some of the numbers on that household segments on delinquency in Malaysia has recovered to pre-March. So we haven't seen any underlying pressure yet coming through from this. To your point on our 25 to 35 basis points guidance, I just want to also recap that last year, we did put in quite a decent amount of overlays related to the trade war around the same time -- this time around last year. And that is also some [indiscernible] inflationary pressure. Our observation period of that is coming to an end -- almost to an end now. And we haven't utilized any amount of that overlays. So we will then need to reassess whether the uncertainty coming from the Middle East would need overlays. And we have -- we can reallocate some of the overlays related to the trade war to this component. And that's where for now, we are fairly -- we are maintaining our 25 to 35 basis points guidance. We will need to see how the macro backdrop further evolves from here. But based on our base case, we believe that our overlays are sufficient to be replenished to a new form of emerging risk.

Yes. I mean I'll just add on to that. I mean we've also been very deliberate over the last few years in terms of reshaping our loan book. I mean we exited the commercial business in Thailand. We've ramped down and turned around the commercial business in Indonesia as well as in Singapore. We've been very deliberate in terms of shifting a lot of our portfolio mix into higher-quality segments. And therefore, that's one of the other reasons why we're still seeing a very resilient asset quality despite the various [indiscernible] that we have been seeing at the moment. But having said that, we don't take anything for granted, we continue to analyze the situation very closely. We're running a lot of scenarios. We're having a lot of conversations with our customers. In fact, we have prepared all the various tools in place internally to support our customers during times like this. I mean in Malaysia, recently, we, as part of the overall industry announced a program to support SMEs that need assistance during times like this, using a cheaper cost of funding from Bank Negara program to then provide competitive financing to customers that need assistance. But we continue to assess the entire situation. But at the moment, I think due to the reshaping of our portfolio over the last few years, that has certainly helped improve the resiliency of our loan book.

That's very useful. Second, can I ask on assets growth? So we shifted to a total assets growth guidance starting this year. You had also shared, I think, previously that demand was still strong in first quarter because of some of the previous pipeline, but the situation is evolving. So do you see clients scaling back? Is there still demand for -- to hit that loans growth target? Or your own risk appetite, are you scaling back in the coming quarters?

I mean we are sticking to our risk appetite because we are very clear in terms of the customer segments that we are banking at the moment. Based on discussions with a lot of our customers, the pipeline is still very strong. On the wholesale side, we're still seeing quite a bit of pipeline, especially in Malaysia and Singapore. So those markets continue to remain strong. So we're still maintaining our asset growth guidance as what we guided earlier this year, given the pipeline that we are seeing.

Okay. And maybe just one last one. Touch n Go Digital had a profitable year, I think, about [ MYR 100 million apartment. ] There are some articles on it recently on whether it is the right time to list or is there -- so how do you think Touch n Go Digital fits into the Forward30 plan? Do you think it's a bit early on for value unlocking from it or all options are on the table?

Touch n Go Digital is a crucial component of Forward30. While the bank in Malaysia banking 9 million customers, Touch n Go bank more than 20 million customers. The value of QR payments has exceeded the value of credit card as well as the debit card transactions in Malaysia. So it's a crucial part of CIMB in terms of how we serve our customers. Because if you think about it, we have Touch n Go, we have OCTO that serves the retail customers. We have OCTO biz that serve the nonretail customers. So it's a crucial part of the business. The growth has been extremely strong, a lot stronger than what we initially anticipated, including this year. With regards to any value unlocking, all options are on the table. We are constantly evaluating the market. We CIMB, we are the top investment bank in the country. We do take a lot of customers to through IPO. We do know what the sentiment is in the capital markets at the moment. In certain segments, it has been very, very encouraging, but we will continue to monitor. We're not in a rush, but the business certainly is in the right trajectory.

Our next question comes from Yong Hong from Citi.

Can you hear me?

Yes.

First question is just on the guidance for this year. If the FX drag persists and if the bond market remains challenging, should we be expecting the 11% to 11.5% ROE to come mainly from your NII growth for this year? Because we also have this restructuring cost from Thailand later this year. So just wondering what can be the offsetting levers? This is my first question.

Yes. Thanks, Yong Hong. So the restructuring cost of Thailand has already been incorporated in the 11% to 11.5%. So there are -- so it is already part of that guidance. If FX continue to be a headwind beyond what we project, then certainly, we are looking at other levers such as our NOII side, which has been performing a lot stronger than what we initially expected. The asset pipeline is as strong as what we have initially anticipated. So I think that part is okay. The other area that we continue to do better than what we budget is on the operating expenses. We continue to be very vigilant with costs. Everyone throughout the organization is relentless about it. And that is something where we continue to see as a potential lever. But certainly, yes, NOII, OpEx, those are potential levers. We also got our capital repayment back. I mean, as you know, November last year, we announced up to end '27. If, let's say, to your point, market growth is a lot slower than what we initially anticipated, then we always have the flexibility to accelerate the capital repayment because if market is not growing due to macroeconomic conditions, then we should return excess capital to shareholders. So we still do have enough levers to ensure that we are within the 11% to 11.5% guidance at the moment.

Maybe just following up on the OpEx. In your Thai briefing [ a few ] weeks ago, there was an OpEx guidance of 2027 to be flat from '25 levels. And there seems to be a cost discipline or cost savings of about [ THB ] 40 million to [ THB ] 500 million next year. So any way can we bring that forward into this year, especially as you were mentioning, if there's any earnings risk that could be unforeseeable?

Yes. So I think we need to be very agile and dynamic on this. And also it's highly dependent on whether we can accelerate some of the cost takeout. And a lot of that really depends on how we execute the Thailand transformation. Like what we highlighted to the market, we are expecting the completion in the early part of fourth quarter, right, and the execution of the cost takeout to be around that time. And some of it will like could potentially spill over in terms of the cost takeout spill over into the first quarter, the full realization in the first quarter of 2027. So we may have some levers to pull the execution of that in the fourth quarter of this year. But again, we have to be very agile looking at the revenue. If we need to really push hard, we have some levers to push hard for it to be executed or realized in the fourth quarter of 2026.

Okay. Got it. And maybe also following up again on the capital return plan. How should we think about timing of that [ MYR 1.25 billion ] residual value because we also have more coming on to our books next year. So just wondering how should we be thinking about the timing for the special dividends?

So at the end of the day, capital is used to grow to deliver shareholder returns if the growth opportunities are not there and it's more efficient to return excess capital to shareholders, then that is something that we will do. But first option, of course, always is to grow the business.

But this [ MYR ] 2 billion that we announced, that should be over and beyond what we are already projecting for that growth, right?

That's correct. So -- but you're asking about timing, right, Yong Hong. So we gave ourselves to end '27. Timing means we accelerate it a lot faster. So that one will be subject to what the market environment is at the moment.

Okay. Okay. But if we spill into next year, then that will basically have an addition to [indiscernible] THB 11 billion.

That's correct. Yes. So there are more coming towards the end of the year. And again, we go through the similar thought process. Are there any opportunities to grow? And if the opportunities to grow will yield better shareholder returns for shareholders, then we will take that path. But of course, if the opportunities to grow do not provide more superior returns to shareholders and it's better off returning the excess capital, then we will do that. So we will go through that same thought process.

Okay. Okay. Got it. And just one small question. I think there was a comment on the one-off impact on NIMs. Is that only impacting the first quarter NII? Or will this interest expense roll off in second quarter or this will be in the new base going forward?

No, it's not going to be a new base. It is a one-off impact that we are taking in the first quarter. So there is a one-off, yes, one-off impact coming through on some adjustments on the structured products on interest expense.

So if you exclude that, what should be the margins for this quarter?

If we exclude that on a Q-on-Q basis, right, you saw firstly, on a reported basis with that one-off impact, we saw it contracting by minus 5 basis points. Without that impact, it will be in the very low single digit, closer to the minus 2 basis points year-on-year -- sorry, Q-on-Q.

Okay. Sorry, first quarter was 2.08% right, NIM?

Sorry, I'm talking about the...

NII.

Yes [indiscernible] contracted by 5 basis points. If you exclude the one-off, it will be closer to minus 2 bps Q-on-Q.

Our next question comes from Jin Han from Affin.

A couple of questions from me. One, could we get a little bit more color in terms of how much wealth management-related income mix of CIMB Group's NOII? And within that particular bucket, what's the contribution from Banca? Could we also get a bit of sense in terms of the magnitude of AUMs in terms of sizing and how that's trended beyond just, let's say, this quarter over the past year or so?

Yes. So I have to get back to you in terms of that specific number of component in terms of wealth. But what I can share off hand, right, 2/3 of fee and commissions come from consumer, roughly about 2/3 come from consumer. That is the basic number. But what I can give you a bit of color because I don't have the number at hand in terms of the wealth proportion. The driver for the year-on-year and Q-on-Q is really driven by wealth. On a year-on-year basis, the Banca Singapore wealth is the biggest driver, where the other components of fee income on consumer is fairly flattish on some areas, it's actually down. So Banca Singapore is really a big driver on a year-on-year basis.

Right, right. And in terms of AUM, how big a size? Is the total AUM is actually managed by CIMB Group?

I don't have the number off hand as well. We'll have to get back to you on that specific AUM number.

Okay, Khairul, no worries. Just another question in terms of looking towards 2027 and the 12% to 13% ROE target, assuming, let's say, Indo kind of goes below 13%, like at the current traction that is actually running up to first quarter, how much more does Malaysia, Singapore, even Thailand have to run in terms of ROE to actually match that 12% to 13% target?

Yes. So I think in terms of the building blocks to that, right, I think, firstly, right, just by the fact that where we are currently in terms of trajectory, let's say, from 2025 to 2027, right? There were in 2026 that -- when you look at the '26 guidance of 11% to 11.5%, that includes a one-off restructuring costs coming out from Thailand of [ MYR ] 1.6 billion, right? So if you look at the building blocks, right? So that is how we give 10 to 20 basis points uplift to 2026 ROE. So that's the first component. The second component is another 10 to 20 basis points coming from the Thai transformation, driven by 2 things. One is the absence of the loss-making auto business. Secondly, as what you have heard from [ Wood ] in terms of the strategy execution on wealth and the ASEAN corporate network doubling down on that segment. So that will give another 10 to 20 basis points. So for Thailand itself, in 2027, that will give us 10 to -- sorry, 20 to 40 basis points uplift to our 2026 ROE. Another component is the capital return program, right? So the capital return program that remaining [ MYR ] 1.3 billion could give us anything between 10 to 15 basis points uplift to the 2026 ROE. So you are already stacking up quite close to the bottom end of 12% to 13% ROE guidance. And the remaining component is really our execution of cash and also cross-sell and cross-sell is wealth and also wholesale banking, cash our growth in terms of CASA, both on retail and nonretail. [Operator Instructions] It appears that we have no further questions, Novan. So yes, please just pass it back to you for your closing remarks.

Thank you very much for your time today to join us on this call. As I -- I just want to reiterate that despite all the headwinds that we're seeing, we're maintaining our guidance and really coming from the point of view where our business on the NII side, we're still seeing very strong asset and loan growth in the pipeline. NIMs are bottomed out. On the NOII side, that has been a big outperformer in the first quarter this year, and we're expecting this to continue to perform very, very strongly. OpEx, team has been extremely disciplined. You've seen reduction in the OpEx numbers. This is something that we'll continue to be very, very vigilant about. Asset quality remain to be very strong. Also mainly as a result of the disciplined growth that we've put in over the last few years, the fact that we've reshaped our portfolio to focus on the more better quality customer segments, and we'll continue to be very vigilant on capital. Put together, all these points is how we will continue to executeforward30 and to maintain our guidance this year of 11% to 11.5%. There are headwinds, whether it is inflation or whether is it on the FX side, but this is where we remain dynamic and continue to move the various levers to offset any headwinds that we see. So with that, have a good public holiday tomorrow [indiscernible] to those celebrating. Thank you very much.

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