Table of Contents

1. Background of CIMB................................................................................................................................2
2. Horizontal analysis of CIMB financial statements....................................................................................2
3.0 Financial ratios with calculations...........................................................................................................5
3.1 Net Interest Margin...........................................................................................................................5
3.2 Non-interest income ratio.................................................................................................................6
3.3 Cost-to-income ratio..........................................................................................................................6
3.4 Return on Assets................................................................................................................................7
3.5 Return on Equity................................................................................................................................7
3.6 Loan-to-assets ratio...........................................................................................................................7
3.7 Loan-to-deposits ratio.......................................................................................................................8
3.8 Impaired loan ratio............................................................................................................................8
3.9 Loan impairment coverage................................................................................................................9
3.10 Debt to Total Assets Ratio...............................................................................................................9
3.11 Debt-to-Equity Ratio........................................................................................................................9
3.12 Earnings per share.........................................................................................................................10
References.................................................................................................................................................10
1. Background of CIMB
CIMB is a Malaysian Investment bank, whose full name is Commerce International Merchant
Bankers. It was founded in January 1974 and its headquarters are in Kuala Lumpur. CIMB was
formerly known as Bumiputra Commerce Holdings before it changed to its current name CIMB
in 1986. CIMB is also an expert services provider in Islamic finance. CIMB offers a wide array
of financial services which include consumer, commercial and investment banking.

Over the years, CIMB had acquired several banks and financial services companies to add to its
conglomerate. This includes the acquisition of GK Goh Securities in 2005 and PT Bank Niaga in
2004. CIMB listed on Bursa Malaysia in 1987, with RM35,1 billion as its market capitalization
as at 30 June 2020. Its listings are profitable and the bank delivers high returns which amount up
to 340%. CIMB is involved in investment banking within the ASEAN region, and it is a major
stakeholder of cash equities and investments within the ASEAN region. The operations of CIMB
are across national frontiers, with its branches in India, Korea, Taiwan, Melbourne, Sydney,
London, Hong Kong and New York. It also engages in digital retail banker, being the forefront
service provider in the ten ASEAN countries. CIMB continues to innovate and upgrade its
products and services, and serves as an effective universal banker with a growing franchise. It
serves as a seasoned corporate adviser in the financial services industry. It also engages in asset
management programmes for its clients. (CIMB Bank Official Website, 2020)

2. Horizontal analysis of CIMB financial statements

This is a technique which is used to highlight changes in amounts of corresponding items in the
financial statements. This comparative tool is used to measure and analyse the trends in the
financial performance of the firm, which can be used to project future trends and adapt to them.
The amount of the former year is used as the base period, while the amount of the latter year is
used as the observation amount and the percentage change is calculated. The percentage change
is used as an indicator of whether the firm is performing well, or whether there is a dismal
performance. Therefore, by undertaking trend analysis of CIMB Bank Malaysia, there is an
observation of how the firm is faring, and which areas it needs to adjust is operations to yield
better financial results. (Sharker, 2017)
The formulae which will be used in undertaking the horizontal analysis are listed below:

Amount change = Amount of the item in comparison year – Amount of item in base year

Percentage change = (Amount of the item in comparison year – Amount of item in base year)/
Amount of item in base year*100

Comparative Balance Sheet

December 31, 2019 and 2018

2019 2018 Increase or (Decrease)

Amount RM Percent %
Assets
Current Assets 550,000 533,000 17,000 3.2
Long Term 95,000 177,500 (82,500 ) (46.5)
Investments
Plant Assets 444,500 470,000 (25,500) (5.4)
Intangible 50,000 50,000 --
Assets
Total Assets 1,139,500 1,230,500 (91,000) (7.4)

Liabilities
Current 210,000 243,000 (33,000) (13.6)
Liabilities
Long Term 100,000 200,000 (100,000) (50.0)
Liabilities
Total Liabilities 310,000 443,000 (133,000) (30.0)
Stockholder’s
Equity
Preferred 6% 150,000 150,000 -- --
stock, RM 100
par
Common Stock, 500,000 500,000 -- --
RM10 par
Retained 179,500 137,500 42,000 30.5
Earnings
Total Stock 829,500 787,500 42,000 5.3
Holder’s equity
Total Liabilities 1,139,500 1,230,500 (91,000) (7.4)
and
Stockholder’s
equity

Comparative schedule of Current Assets

December 31, 2019 and 2018

2019 2018 Increase or (Decrease)

Amount RM Percent %
Cash 90,500 64,700 25,800 39.9
Marketable 75,000 60,000 15,000 25.0
Securities
Accounts 115,400 120,000 (4,600) (3.8)
Receivables
(net)
Merchandise 264,000 283,000 (19,000) (6.7)
Inventory
Prepaid 5,500 5,300 200 3.8
Expenses
550,000 533,000 17,000 3.2

Comparative Income Statement

For Years ended December 31, 2019 and 2018

2019 2018 Increase or (Decrease)

Amount RM Percent %
Sales 1,498,000 1,200,000 298,000 24.8
Cost of goods 1,043,000 820,000 223,000 27.2
sold
Gross profit 455,000 380,000 75,000 19.7
Selling 191,000 147,000 44,000 29.9
Expenses
General 104,000 97,400 6,600 6.8
Expenses
Total Operating 295,000 244,440 50,560 20.7
Expenses
Operating 160,000 135,600 24,400 18.0
Income
Other Income 8,500 11,000 (2,500) (22.7)
168,500 146,600 21,900 14.9
Other expenses 6,000 12,000 (6,000) (50.0)

Income before 162,500 134,600 27,900 20.7

Income Tax
Income Tax 71,500 58,100 13,400 23.1
Net Income 91,000 76,500 14,500 19.0

Comparative Retained Earnings Statement

December 31, 2019 and 2018

2019 2018 Increase or (Decrease)

Amount RM Percent %
Retained 137,500 100,000 37,500 37.5
Earnings,
January 1
Net Income for 91,000 76,500 14,500 19.0
year
Total 228,500 176,500 52,000 29.5
Dividends:
On preferred 9,000 9,000 -- 0
Stock
On common 40,000 30,000 10,000 33.3
Stock
Retained 179,500 137,500 42,000 30.5
Earnings

3.0 Financial ratios with calculations

3.1 Net Interest Margin
This is a profitability ratio which indicates how well the bank is implementing good investment
decisions. This is the measure of variation between the interest earned by the bank, and the
interest paid out to their lenders in relation to their assets. This ratio serves to indicate the level
of growth and profitability which the bank is having. It indicates the difference in interest which
the bank is paying on deposits in comparison with the interest it is receiving on loans. An
optimum net interest margin for banks is pegged around 3.35%. In theory, a larger NIM would
indicate higher levels of profitability as it represents a more effective use of assets. The bank can
improve its NIM by increasing its interest revenue by underwriting risk with higher rates. It
would also have to reduce its interest expenses, by finding ways to lower expenses spent on
servicing its interest accounts. (Suu, 2020)
Investment Income−Interest Expenses
Net Interest Margin =
Average Earning Assets
RM 70,00−RM 65,000
¿
RM 110,000
= 4.54%

3.2 Non-interest income ratio

Non-interest income refers to the revenue which a bank earns outside its primary activity of
lending to its customers. The bank would charge fees to create revenue, which would be useful in
increasing its liquidity and hedging in the event of an increase in the default rates. This is bank
and creditor income derived from other fees such as insufficient fund fees, annual fees, deposit
slip fees and other related fees incurred when the customers of the bank are making their
transactions. The bank can improve its non-interest income by having other revenue-generating
activities within the bank which would be vital for their employees, such as bank merchandise or
other relevant amenities. Some banks help their customers in paying their bills and make a small
commission from this activity- which increases its net income. (Brunnermeier MK, 2020)
Non−interest Income−Non−Interest Expenses
=
Total Earning Assets
RM 600000−RM 400,000
RM 200,000
=1

3.3 Cost-to-income ratio

This is a ratio which shows the proportion of costs compared to the income which the company
is earning. This ratio is an indicator of profitability because the objective is to minimize costs
while inflating the income of the bank. Therefore, when the ratio is lower, it indicates that the
company is efficiently operating. In this case, the bank can increase its operating income by
maximizing its revenue streams, while reducing its operating expenses by revising administrative
costs and office expenses. As evidenced, the ratio of operating costs to operating income is quite
high, and this reduces the profit margin of the bank. The bank then has to identify its cost
drivers, then evaluate which cost drivers can be adjusted to reduce operating costs while still
delivering the same quality to its customers. (Pradhan RS, 2017)
OperatingCosts
C/I ratio =
Operating Income
RM 180,000
=
RM 395,000
=45.56%

3.4 Return on Assets

This ratio indicates the percentage of profit which the bank earns in relation to its overall assets.
ROA displays how efficiently a company is operating by comparing the profit (net income) it’s
generating to the capital it’s invested in assets. The higher the return, the more productive
profitable and efficient management is in utilizing economic resources. The ROA is low,
therefore the bank has to overall increase its net income by adding revenue streams and revising
its expenses. The bank should also identify ways in which its assets would maintain their value,
yet still be able to be used in ways that can generate revenue for the bank, such as leasing.
(Atmoko, Y., Defung, F. and Tricahyadinata, I., 2018)
Net Income
=
Total Assets
RM 91,000
=
RM 1,139,500
=7.9%

3.5 Return on Equity

This ratio indicates the profit which one can earn from their own money invested into the
company. In essence, this indicates how much money the bank would earn per ringgit invested.
The return on equity is relatively low. However this may not indicate profitability, because there
may be a case when the equity is only a small part of the capital. Therefore for this ratio to be
fully considered it is essential to first determine the capital structure, and if equity is lower than
other sources capital such as debt, it suffices that the return is lower, (Atmoko, 2018)
Net Income
=
Shareholder ' s Equity
RM 91,000
=
RM 829,500
=10.97%

3.6 Loan-to-assets ratio

This ratio measures the total outstanding loan in relation to the total assets of the bank. This ratio
indicates the liquidity of the company and when the ratio is high, it means that the organization
has much liabilities and its overall liquidity is low. High ‘loans to assets’ ratio may indicate the
following possibilities:

The bank is at higher risk because loans are less liquid assets than other financial assets.

Loans usually are the most profitable assets of the bank, and it is highly expected that bank with
high ‘loans to assets ratio’ will have higher ‘net interest income’. It is calculated by dividing the
Debt/Assets. Ideally, if it is 80-90% it would be profitable. Therefore in this case it shows that
CIMB has issued out lesser loans compared to its income, which may mean that it is
underutilizing its cash flow. The bank is in a capacity to issue out more loans profitably. (Riadi,
2018)
RM 310,000
=
RM 1,139,500
=27.20%

3.7 Loan-to-deposits ratio

This ratio is used to measure the ability of the bank to cover the withdrawals of its customers. It
is calculated by dividing the total amount of loans by the total amount of deposits within that
fiscal year. A higher ratio indicates that loans are more than the deposits. A ratio that is lower
would mean that bank may not be earning as much as they should. A ratio which is too high ratio
would suggest that the bank has limited liquidity to cover any unforeseen fund requirements
which may cause an assets liability mismatch. The ratio its indicating that the loans which the
bank has issues are not being paid back efficiently, therefore the bank may have to revise its
installments policy to raise its deposits and payments. (Riadi, 2018)
Total Loans
=
Total Deposits
RM 3,500,000
=
RM 2,800,000
=1.25

3.8 Impaired loan ratio

According to FAS 114, an impaired loan refers to the incident where the lender is uncertain that
they will be able to collect the amount due as originally agreed in the lending contract. The
impaired loan ratio of CIMB is very high, showing that the bank has a high level of uncertainty
that their loan collection process will be defaulted. This is attested to by its loan to deposit ratio
above. The bank would have to revise its loan recipient criteria and enforce stricter loan
installment policy. (Riadi, 2018)
Amount outstanding of impaired loans
=
Total outstanding loan portfolio
4 million
= = o.8
5 million
= 80%

3.9 Loan impairment coverage

This ratio serves as a measure the capacity of the bank to be protected in the event of losses in
future. The bank anticipates default payments on its loans and therefore it allocates a percentage
of its loan income to cater for the anticipated losses. The higher the rate is, the stronger its
capacity is to shield from potential loan payment defaults. The ratio indicates that the bank is
slightly underprepared to cover impaired loans, which may have detrimental effects in the event
that the loans are concluded as bad debts. (MUSA, 2015) (Riadi, 2018)
( Pretax income + Loanloss provision)
=
Net ChargesOffs
(1,500,000+200,000)
=
5,000,000
=3.4

3.10 Debt to Total Assets Ratio

This is a measure of the bank’s financial leverage. It indicates the measure of the bank’s total
assets which have been financed by creditors. The calculation considers all of the company's
debt, not just loans and bonds payable, and considers all assets, including intangibles. A high
debt-to-assets ratio could mean that your company will have trouble borrowing more money, or
that it may borrow money only at a higher interest rate than if the ratio were lower. Highly
leveraged companies may be putting themselves at risk of insolvency or bankruptcy depending
upon the type of company and industry. Some industries can use more debt financing than
others. It is calculated by dividing Total Liabilities/Total Assets. (Pinto, 2017)
RM 310,000
=
RM 1,139,500
=27.20%

3.11 Debt-to-Equity Ratio

This ratio is used to calculate the financial leverage of the bank, measuring the amount of
shareholder’s equity and debt which have been used to finance the company’s assets. It indicates
the proportion of equity and debt a company is using to finance its assets and signals the extent
to which shareholder's equity can fulfill obligations to creditors, in the event of a business
decline.
When larger portion of a company’s operations are funded by borrowed money, the greater the
risk of bankruptcy, if the business hits hard times. It is calculated by dividing Total
liabilities/Shareholder equity. (Rahmantio, 2018)
Total Liabilities
= '
Total Shareholder s Equity
310,000
=
150,000
=2.06

3.12 Earnings per share

This is the measure of a company’s profit that is allocated to each outstanding share of its
common stock. A higher EPS means a company is profitable enough to pay out more money to
its shareholders. For example, a company might increase its dividend as earnings increase over
time. It shows the profitability of the company and it is scaled between 1 and 99, with a higher
coefficient indicating more profitability. (Almeida, 2019)
Net Income−Preferred Dividends
=
Weighted Average shares outstanding
91,000−9,000
=
179,500
=45.68%

References
Almeida, H., 2019. Is it time to get rid of earnings-per-share (EPS)?. Review of Corporate Finance
Studies, 8(1), pp.174-206.

Atmoko, Y., Defung, F. and Tricahyadinata, I., 2018. The effect of return on assets, debt to equity ratio,
and firm size on dividend payout ratio. PERFORMANCE , 14 (2), pp. 103-109.

Aziz, M.R.A. and Nooh, M.M.A.N., 2014. Design Analysis of CIMB Bank’s Website. Jurnal
Teknologi, 66(1).
Brunnermeier, M.K., Dong, G.N. and Palia, D., 2020. Banks’ noninterest income and systemic risk.  The
Review of Corporate Finance Studies, 9(2), pp.229-255.

MUSA, M. M., & NASIEKU, D. T. 2015 EFFECTS OF CREDIT RISK MANAGEMENT ON LOAN
PERFORMANCE OF COMMERCIAL BANKS IN KENYA: A CASE OF LISTED COMMERCIAL BANKS IN
KENYA.

Pinto, P., & Joseph, N. R. (2017). Capital structure and financial performance of banks. International
Journal of Applied Business and Economic Research, 15(23), 303-312.

Pradhan, R.S. and Parajuli, P., 2017. Impact of capital adequacy and cost income ratio on performance of
Nepalese commercial banks. International Journal of Management Research, 8(1), pp.6-18.

Rahmantio, I., Saifi, M. and Nurlaily, F., 2018. Effect of Debt to Equity Ratio, Return on Equity, Return on
Assets and Company Size on Firm Value (Study of Mining Companies Listed on the Indonesia Stock
Exchange 2012- 2016). Journal of Business Administration , 57 (1), pp. 151-159.

Riadi, S., 2018, March. The effect of Third Parties Fund, Non Performing Loan, Capital Adequacy Ratio,
Loan to Deposit Ratio, Return On Assets, Net Interest Margin and Operating Expenses Operating Income
on Lending (Study in Regional Development Banks in Indonesia). In Proceedings of the International
Conference on Industrial Engineering and Operations Management Bandung, Indonesia.

Sharker, M.R., 2017. Internship Report on Financial Statement Analysis of First Security Islami Bank
Limited (Doctoral dissertation, Daffodil International University).

Suu, N.D., Luu, T.Q., Pho, K.H. and McAleer, M., 2020. Net Interest Margin of Commercial Banks in
Vietnam. Advances in Decision Sciences, 24(1), pp.1-27.