CIMB: Embracing Diverse Needs

It doesn’t come as a surprise when the CIMB Group announced a record RM3.5 bil net profit in 2010. Last year was a super year for properties and news abound of record profits among the big developers. Banks naturally follow suit as they play a pivotal role in the property industry. We speak to Peter England, Head of Retail Financial Services, CIMB Bank, on the bank’s take on property loans.

iProperty.com: How much of your total loan portfolio consists of property loans?
Peter England: Property loans to individual borrowers make up about 30% of our total loans in CIMB Bank Malaysia. We believe this an appropriate size given the diverse nature of our business in Malaysia.

iP: What was your growth rate of property loans from 2009 – 2010 on a yearly basis?
PE: The growth rate of our property loans from 2009 to 2010 is in the high teens. Our growth rate is higher than the industry average mainly due the fact that we have a very large branch network and one of the largest mobile sales teams in Malaysia. The mobile sales team particularly, is able to provide very personalised service to clients as they can meet at the customers’ convenience in terms of time and location, so clients do not need to come to the bank.

iP: What is the outlook for the property market this year?
PE: The broader property market appears to be softening a little, particularly in certain areas where there seems to be oversupply. But as always, demand for good quality properties (both primary and sub-sale) in areas where supply is limited is robust and its outlook for this year continues to be good. Property prices in and around Kuala Lumpur have appreciated and properties, especially the landed ones are still in great demand.

iP: Have you seen any increase in property loans take-up since the beginning of this year?
PE: There have been no obvious changes this year, up or down. Again, primary and sub-sales are very strong in certain areas, and rather weak in others.

iP: How has the 70% cap on 3rd mortgage onwards affected your property loan portfolio?
PE: Not significantly at this stage. We may eventually see slower take up from investors, however, the number of people with 3 or more residential property loans is relatively small.

iP: Do you see any hike in interest rate this year?
PE: Market view seems to expect a smallish rate hike, perhaps up to 50 bps by year end, so we will wait and see. As global recovery continues to be questionable, particularly in the light of recent unfortunate events, it is possible that rates may stay where they are. As always, we would expect Bank Negara Malaysia (BNM) to take a very careful approach in balancing economic growth and the risk of inflation, so I don’t think we would expect anything too dramatic.

iP: Will you be coming up with special loan packages for homeowners this year?
PE: We recently launched a unique home loan package called Capped Rate Loan. This package allows a customer to choose a cap for the base lending rate (BLR) and this will provide the customer with peace of mind because of the protection against rising BLR. With the chosen cap, customers are guaranteed that their interest rate will not rise beyond a certain pre agreed limit during the capped period of 3 years or 5 years. However, should BLR fall below the cap, customers will enjoy cost savings because of the lower rate. This package will allow customers to enjoy the best of both worlds.

In fact, CIMB Bank offers various packages depending on the diverse needs of the customers. For pricing considerations, we have fixed rate packages, fixed-to-float packages as well as floating rate packages. Fixed rate packages usually offer customers the peace of mind while the floating rate package is subjected to BLR/base financing rate (BFR) fluctuation.

In terms of facility type, there are term loans, flexi loans and overdraft facilities available. Term loan facility allows customers to manage their cash flow with a repayment schedule. Meanwhile, flexi loan facility allows customers who have extra cash in hand to enjoy interest/profit savings whenever they pay extra, and overdraft facility provides customers the convenience of having access to standby cash.

iP: What is your view on 2nd generation loans? Please define it.
PE: We do not have a package specifically called 2nd generation loans. However, where appropriate, we do approve loans based on the younger applicant’s age to compute the tenure in the case of joint application where one applicant is much older in age.