CIMB Group closes Australia office following review

SYDNEY: CIMB Group, following a strategic review of its entire business yesterday, announced that it will be closing its offices in Sydney and Melbourne.
This follows an announcement last Friday that it is looking to reduce its Asia Pacific investment banking and equities operating cost by 30% in 2015.
"We have taken a long hard look at our Asia Pacific investment banking business. The realities of today's capital markets and the absence of sufficient flows have directly contributed to this decision," said CIMB Group acting group CEO Tengku Zafrul Tengku Abdul Aziz.
"The rest of our Asia investment banking platform remains intact," he clarified.
The decision will impact the majority of CIMB's 103 Australian staff, who will be made redundant but will be provided with some redeployment opportunities and outplacement support.
CIMB will continue to support its clients who want access to the Australian market through its current strategic alliance with Morgans Financials Limited.
CIMB's (T18) initiative aims to see the group achieve a 15% return on equity (ROE), have a core equity Tier-1 capital of more than 11%, drive cost-to-income ratio lower than 50% and for consumer banking to contribute about 60% of its income by 2018.
Maybank Investment Bank Research said the CIMB's T18 targets "are lofty" as it lacks specifics especially on how the cost savings are to be achieved.
It analyst Desmond Ch'ng said that while CIMB's ROE target is potentially achievable, costs will have to be aggressively reduced and the risk is that such cost reductions may take a longer-than expected time to achieve.
"Moreover, expenses may have to rise in the near term before the cost synergies filter through, he said.
Meanwhile, Alliance DBS Research said with the T18 initiatives, CIMB appears to be setting the stage for the next three years after failing to proceed with the merger with RHB Capital Bhd and Malaysia Building Society Bhd (MBSB), which would have been a game changer in the Malaysian banking arena.
"We believe it is too early to judge if its T18 initiatives would be successful or otherwise. In our view, investors should see this as a strategic step forward amid the changing banking landscape.
"There will no doubt be near term earnings weakness starting from the upcoming Q4'14 set of results which will be released next week. The drag is likely to be felt throughout FY15F," said the research firm which maintained a "hold" call on CIMB with a target price at RM6.20.
CIMB Group shed 10 sen or 1.72% to RM5.70 with 10.4 million shares traded yesterday.