Good afternoon, ladies and gentlemen, and welcome to CIMB Group's financial results briefing for the second quarter of 2026. Our host today is CIMB Group CEO Novan Amirudin, and Group CFO Khairul Rifaie.

My name is Steven from the CIMB IR team. You should have received the analyst presentation and financial statements via email from the group IR email.

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. All participants' lines are currently on mute, and you'll have the opportunity to ask questions after the presentation by using the hand raise hand function.

At this juncture, I would like to hand the over the briefing to Novan and Khairul. Uh Novan, over to you.

Thank you very much, Steven. Uh good afternoon, uh everyone, and thank you for joining us today.

Uh I'm pleased to share our second-quarter uh '26 performance. Uh it has been a very resilient performance.

In fact, we're seeing uh very good momentum as we move from the first quarter to the second quarter. For second quarter, uh we delivered uh net profit of 1.94 billion ringgit, which then translates to an annualized uh ROE of 11.2% uh for the quarter.

Uh and the earnings momentum that we're seeing uh, is as a result of the transformation activities that we have been doing uh with regards to Forward30, which we started uh last year. Before I I I I deep dive into uh some of my observations, uh just want to share re- with you again a recap a bit of our journey over the last 1 and 1/2 years.

We we mentioned that we're going to focus on the 4Cs: capital, cash, cross-selling, and capabilities. With regards to capital, uh we have been assessing the underperforming businesses within our portfolio.

We've been assessing businesses where, uh would have difficulties in terms of scaling up uh by 2030, uh and we've taking very very decisive actions. We started with uh the divestment of our Thai auto business, uh which we uh scheduled uh to complete uh on schedule uh by by by the fourth quarter of this year, or the early fourth quarter of this year, which will then uh free up capital uh for us to reallocate into other uh higher-growth and higher-profitability uh businesses.

Um. Uh we then, uh focus a lot on uh our cash and our cross-sell uh initiatives.

On the cash side, uh our front-end apps, OCTO, OCTOBiz, Touch 'n Go, are all next-generation ready. Uh and now, we are leveraging a lot on the strengths between uh the CIMB Group apps, which is OCTO, OCTOBiz, and our platform itself, together with uh together with the the the Touch 'n Go um uh platform.

Uh on the cross-sell side, a lot of focus on our regional wholesale uh presence. Uh we've made uh a number of new hires across the bank.

Uh we're operating wholesale very differently, uh very centrally um uh uh uh focused. Uh and that has basically allowed us to capture a lot of the opportunities that we're seeing uh coming up in the recent structural shifts that we are seeing uh across uh ASEAN.

Uh namely, on the AI data centers, uh wealth, uh as well as cross-border trades. Uh where these three uh themes obviously driving a lot of the growth that we're seeing uh in the momentum uh that that we have uh in the second quarter.

Then, on the capability side, a lot of focus has gone in over the last 1 and 1/2 years to make ourselves simpler, better, faster. It's about making our processes more efficient, and then once the processes are more efficient, we then apply technology and AI uh to make it better.

Um we're starting to be able to extract value uh from the simpler, better, faster transformation uh by by by reducing costs. Cost is coming down if you look at our cost over the last couple of quarters, it is trending down, uh and we expect uh OpEx uh to come down some more.

All in all, the transformation exercise under Forward30 with regards to the 4Cs is taking shape, uh it is accelerating, it is um creating a differentiated franchise for us, which then allows us to capture uh the growth opportunities uh that we are seeing. Despite, the challenging backdrop, despite uh what everyone is seeing in Indonesia, uh despite what people are seeing in Thailand, the transformation exercise that we have has been able to mitigate uh all these challenges.

Therefore, uh for the second quarter, both NII and NOII are up quarter-on-quarter. Uh in fact, on the NII side, it's really led by growth in assets and loans, up 2.2% and 1.1% quarter-on-quarter uh respectively.

Uh and this increase has managed to offset the 4 basis points uh NIM decline uh that we're seeing. Uh what is encouraging is the loan and asset pipeline remains uh very strong, uh and therefore, we expect uh to meet our assets and loan growth uh guidance that we guided uh earlier in the year.

NOII saw 6% growth quarter-on-quarter, mainly driven by the themes that I mentioned earlier around wealth and cross-border. We're seeing higher franchise fees, and we're seeing a sustained level of client sales momentum, whether is it in the wealth business, or whether is it in the treasury client sales business.

Uh and then our transformation to become simpler, better, faster, I mentioned earlier about the OpEx declining, cost-to-income ratio for the quarter was 45.2%, but not at the expense uh of investment uh in technology and AI. Uh asset quality remains stable.

Um GIL has improved to an all-time low of 1.6%. As a result, uh we are we've we are declaring a dividend of 19.65 cents uh per share, uh which translates to a payout ratio of above 55%.

Our CET1 is at 14%. Some examples of um what we have introduced uh under Forward30 in the second quarter, uh and all these are done to really differentiate ourselves uh versus our peers.

First is to make sure that we can capture the opportunities that's arising from the structural shifts in ASEAN. Uh three main themes that we saw: AI data centers, wealth, and cross-border corridors.

We're positioning ourselves within each of these areas to make sure that we can capture all this growth. In fact, the asset/loan growth that we're seeing uh um um quite uh a sizable proportion of it is coming from the AI and data center space.

Uh with regards to wealth, we introduced a new uh private wealth segment uh to coexist in between the preferred and private banking segments that we already have. This is really to tap into a customer segment that we haven't uh, serviced as well with having two segments only in the past.

Um on the digital side, we also introduced a new feature on OCTO called MyWealth. Uh so on our OCTO banking app, uh there is a feature, you click on MyWealth, you answer 14 questions, it will then assign to you a risk rating.

Ba- Based on that risk rating, it will suggest to you an asset allocation uh in terms of how much cash you should have, how much regional equities, local equities, fixed income, alternative investments. Then within each of that asset class, the MyWealth app will then recommend to you what investments to invest in.

Something very different uh compared to what else is on the market today. I think most banking apps, you will need to decide yourself what to invest in over the over the hundreds of products that's available, but on OCTO, uh it's very advisory-focused, and it's available to everyone.

Cross-border corridors, uh I've mentioned this previously, uh our commitment in JS-SEZ with regards to our RM10 billion loan commitment, uh we are we are outperforming on that side. A lot of it linked to data centers uh as well as our ASEAN Financial Passport program.

Uh we've announced a number of partnerships and MOUs with regards to China and ASEAN, both with uh financial institutions as well as um with technology providers uh such as blockchain. Uh and we continue to double down on our very successful Singapore-Malaysia uh corridor.

Uh the most successful product at the moment is um uh the the the our FX proposition. Uh there's a lot of Malaysians working in Singapore, they send money home back every month, we guarantee you best FX rates.

As a result, customers open CASA account with us in Singapore and Malaysia. Um one area that we are doubling down on and we've increased that intensity this second quarter, in fact we introduced two new products, uh is really to increase um the the the leveraging between CIMB platform and Touch 'n Go platform.

Uh this is where CIMB is unique, no other peer in Malaysia uh, is both a universal bank as well as uh the national e-wallet. Um we have the benefit uh of both, uh and we are leveraging on both platforms.

Uh two new um uh uh services that we introduced this second quarter. First, is the ability to invest in gold via the Touch 'n Go app, uh and this service is provided by CIMB.

Secondly, is if you're an SME business, you use Touch 'n Go for collections today, you can then also apply for working capital financing via um uh the the BizCash um uh uh feature on Touch 'n Go app. You click on the app, uh it then directs you uh to CIMB.

Thirdly, this is something we announced yesterday. Uh we believe this is the future of uh financial markets, and this is tokenization.

Uh it has been a four-month journey for us. Uh in April, uh we were advisors uh to Khazanah, uh who pioneered uh tokenized sukuk issuance in Malaysia.

Uh given that was the first issuance, we started small. We started with a RM100 million, uh and with a few institutional investors who invested via fiat currency.

What we did yesterday, we took it to the next level. Um we used the CIMB bond uh to be issued in tokenized format instead.

Of a RM1.68 billion issuance, RM1.38 billion was issued in tokenized format. Uh it was issued to 12 institutional investors, and those investors subscribed for our sukuk using a CIMB tokenized deposit.

This is the evolution starting from the Khazanah pilot to now the CIMB pilot. Uh we are the first Malaysian bank to do so, but we are doubling down on tokenization because we do believe this is the next um uh uh uh financial market uh innovation uh that will come through uh over the next coming years, and we want to make sure that uh we are the first uh to to to innovate and to and and and to introduce this to to our customers.

Um both were executed still under a sandbox approach, uh but there's been many learnings by the entire industry with regards to this, from the regulators to issuers, investors, advisors, uh and we're taking all these learnings, uh for for future for for for future issuances. The next step for this really is to move from pilot phase uh to to to practical execution.

With that summary, uh I will now hand it over to Khairul uh to go through uh the rest of the presentation. Khairul, over to you.

Thank you,

Novan, and good afternoon uh everyone. Firstly, what I'll go through is the second-quarter uh key highlights in terms of the financials on slide uh six.

A few key points here that I wanted to highlight. Uh firstly, uh the strong NOII growth uh that Novan uh mentioned has resulted in terms of the proportion of NOII contribution to total income expanding nicely by 1 uh percentage points.

During the second quarter, we also took uh some conservative view in terms of our overlays, uh and that uh has resulted in our credit cost uh being at 38 basis points uh during uh the quarter. If you go to the next slide on slide seven, on the full half-year uh basis, the additional uh overlays that we took during the second uh quarter, uh the full the half-year annualized credit cost is at 34 uh basis points, well uh still well within our guidance of 25 uh to 35 uh basis uh basis points.

Uh the strong uh NOII growth that continued during the second quarter has translated on a on a good year-on-year number where that proportion has expanded by 1.3 uh percentage points, coupled with the strong total asset growth uh on a constant currency basis at 6. uh 3% uh year-on-year, this has mitigated the margin compression of -10 uh basis points on a year-on-year uh basis.

Other highlights that I wanted to to share, if you look at slide uh if you move to slide uh eight, uh firstly, uh just giving more color on that uh NOII growth. This is the second quarter where we recorded good sequential growth on NOII.

If you look at the left-hand chart, during the first quarter, NOII sequentially grew by 11.9%. In the second quarter, uh NOII sequential growth was also strong at 6% uh Q-on-Q.

This really drove our total income growth of 2.8%, coupled with the fact that total asset growth was good at 1.8% uh Q-on-Q. This overall mitigated that 4 basis points margin compression that you see on the line chart at the bottom.

Uh we have been saying that, FX uh translation uh has had a negative impact in terms of growth on our reported number. However, if you look at our underlying performance on a constant currency basis, those line charts are depicting the year-on-year growth of both operating income and net profit, and both trend lines you can see in terms of our operating income has been resilient on the year-on-year growth basis on constant currency, hovering around that 4% level.

Similarly, on net profit that has been relatively stable except for the first quarter, but overall, it's still hovering around that 4% to 5% uh growth uh uh level. On cost, uh this is where uh we have exercised very good cost uh controls where both on a Q-on-Q and year-on-year basis, our cost has come come down.

Moving on to the next slide, uh slide nine, uh this is some of the key highlights of business uh segment. Firstly, on uh consumer uh banking, the strong growth on a Q-on-Q basis is really driven by wealth and also other income, NOII uh growing by 10% uh Q-on-Q driving that PBT growth.

On a year-on-year basis, uh consumer banking did face uh some margin uh pressure, and this is coupled by the absence of overlay write-back and also right backs related to model enhancements that we recorded in 2025. The absence of that resulted in the PBT uh coming coming down.

On wholesale banking, both on a Q-on-Q and year-on-year basis, uh the growth is mainly driven by robust treasury and markets uh total income growth. However, during the uh this year, we also had uh some recoveries uh in Singapore and also Indonesia contributing uh to that uh PBT bottom-line uh bottom-line growth.

On commercial banking, uh Q-on-Q, uh the absence of an overlay write-back and recovery in the second quarter versus the first quarter resulted in PBT uh being lower. On a year-on-year uh basis, uh that recovery during the first quarter of 2026 also contributed to the overall half-year growth on a year-on-year basis, coupled with the fact that the client franchise NOII uh number was stronger for uh commercial banking uh year-on-year.

On CDA, both on the Q-on-Q and year-on-year number was impacted by some of the central OpEx uh that we took during the second quarter, which was related to the Thai transformation restructuring, and also some of the central expense provisions that we took, and that impacted the overall number. However, if you look at Touch 'n Go Digital on its own, it's still projecting well in terms of profitability.

Next slide on uh country, Malaysia, Q-on-Q, uh the top-line growth uh is strong uh at 9%. Uh this is however offset by the timing of uh our write-backs and bookings of overlay, so that uh moderated the bottom-line uh growth to 1.1%.

Uh on a year-on-year basis, similarly, uh the timing of the overlay write-backs and overlay charge impacting the bottom-line growth. However, if you look at it from a top-line perspective, Malaysia uh top line grew by 3.7% with NII exceeding that, growing at 4.

uh 3%. Uh Singapore, uh Q-on-Q, uh we did have a legacy recovery coming through during the second quarter, driving that PBT growth.

On a year-on-year basis, in addition to that second quarter 2026 uh recovery, bancassurance wealth also grew well on a year-on-year uh basis. Indonesia, overall, uh we have uh some challenges in terms of uh NII, uh impacting some of the moderate uh NII growth for both Q-on-Q and year-on-year.

Uh we did also record lower uh recoveries, whereas in the first quarter we recorded a lot more write-back. Similarly, on a year-on-year basis in 2025, there were a bit more write-backs coming coming through.

The absence of those impacting the bottom-line uh performance. Uh Thailand, uh Q-on-Q is related mostly to the restructuring costs that we booked uh during the second quarter.

On a year-on-year basis, overall, uh driven by the transformation that we're doing in Thailand, we are seeing better OpEx year-on-year, and we are also seeing lower uh ECL year-on-year driving that stronger PBT performance. On slide uh 11, uh breaking uh the P&L down, uh firstly, uh on NII.

You can see our NII growth uh is good at 1.3% uh Q-on-Q despite the margin pressure of 4 basis points. If you break down that margin pressure, firstly, uh it's coming through uh coming from Malaysia, uh coming down by 6 basis points, and this is mostly driven by higher cost of uh deposits uh predominantly on the wholesale side as we fund our strong total asset growth during the quarter, but also uh looking beyond uh where we have a strong pipeline on asset growth uh within uh within Malaysia as well.

In Indonesia, on the headline, uh we are reporting an slight expansion in margin by 2 basis points. On an underlying basis, uh we do see some um pressure uh given the competition on FDs, and also the timing difference where we had a significant rate hike uh during uh during the quarter.

Thailand, uh we continue to see very good liquidity. Uh we continue to gain uh deposits despite us optimizing the pricing on deposits, and that has continued to drive our Thai expansion uh in margins.

Uh on the other hand, in Singapore, we did see some uh slight pressure on SORA, which has impacted our yields, and that drove our margin uh compression by 3 uh basis points. On a year-on-year basis, uh uh the the the the the the weakness in terms of our NII is mostly due to FX uh translation.

Uh the total asset growth has been good. Uh if we're only looking on a constant currency basis, our NII did grow by 1.

uh 7%. Uh margins did contract by 10 basis points, that's mostly driven by uh Indonesia uh because of the uh backdrop and also the interest rate hikes.

Uh in Singapore, the significant SORA movement have impacted our NIMs uh as well. On the other hand, if you look at uh Thailand, because we managed to reprice our deposits, we managed to expand our margins quite uh decently.

In Malaysia, we did see a bit of margin pressure of 3 uh basis points, and this is related to the second-quarter uh movement. Uh but I think it's important to highlight, for Malaysia, we did get an interest rate um cut uh in July 2025.

The comparatives will start to look a bit uh easier. Uh just to recap, in 2025, for the on a full-year basis, our margin in Malaysia is at 1.78%.

At the moment, we are just slightly down uh compared to the full year of 2025, 1.7 uh 7%. Moving on to uh NOII uh on the next uh slide, uh you can see in terms of the the driver for the quarter, uh it's coming from uh firstly uh fees and commission, that's mostly coming through from wholesale banking.

We are sustaining a good level or high level of wealth and also client sales uh uh numbers, even though it's slightly down, but it's still at a sustainable at a sustained high high number. Uh the other driver, if you look at it under other income, we did record a lumpy non-recurring uh 1 million 100 million ringgit uh in in Malaysia uh that was recorded in the second uh second quarter.

On a year-on-year basis, overall, uh wealth and other income is the main driver uh of of the growth. Uh fees and commission is down mainly because of corporate fees being weaker uh in Singapore.

Uh wealth is mostly driven by Singapore and Malaysia. Uh trading is flattish, whereas client sales treasury continues to outpace uh the trading side, growing by 4.3% uh year-on-year.

Uh I'll give a bit more color in terms of other income uh line. Uh the other income line, last year, in 2025, we did record an NPL set NPL sale gain mostly in Indonesia of 100 million ringgit.

This year, in 2026, during the second quarter, we did record a lumpy non-recurring uh other income in Malaysia of 100 million ringgit. If you exclude both of that uh during the two years, we did there is a slight increase of 100 million ringgit under other income, and that's related to mainly two things: one is brokerage income did increase slightly, that's number one; uh number two, uh the foreclosed assets uh is lower coming from Indonesia where we record it as other income uh on a year-on-year uh on a year-on-year basis.

On operating expense, uh you can see uh it's well-contained, uh flattish at that level. There are some movements uh within the lines.

Uh personnel costs, because of our timing of uh bonus provisions, that is lower. Underlying basis that has been very stable.

Similarly, technology, on an underlying basis, is stable as well. We did record some one-off uh write-backs related to provisions on projects that are going live.

Uh but if you take that out, on an underlying basis, that's stable. Uh others is more on the timing of some of our marketing and advertisement campaigns.

Uh on a year-on-year basis, uh you can see uh that number has uh come down, and mostly on our cost controls on the others uh component, and also personnel costs are being flat if you think about it. Typically, our personal cost with our increments uh it should go up, but this is where the cost containment has come through.

In terms of our investment that continues uh to that continues to be the case with our tech CIR being maintained around that 8% uh level. Moving on to slide 14, on asset quality, from an overall perspective, uh that remains uh stable on an underlying number.

Uh but if you look at the P&L uh ECL movements, I'll break this down uh on segment by segment. Uh if you look at retail uh firstly, uh we did have firstly, we did have some overlay write-back uh last quarter.

Uh and then during this quarter, we reallocated that overlay into those uh related to uh inflationary inflationary risk related to to to to the Middle Eastern uh conflict. Uh so the net change of that uh is around 70 uh million ringgit, that's number one.

Uh number two, in Indonesia, as what you may have already heard during the during the analyst briefing in Niaga, there is a change in treatment from OJK in terms of the foreclosed assets for auto, and that resulted in a 60 million upfront uh provision that we needed to make uh during the second uh quarter. This should normalize as we start to recover uh those those assets, but now the treatment is that we need to take that provision upfront.

Uh so net net, uh that explains the movement on uh retail. On non-retail, almost similarly, it's related to overlay.

During this first quarter, we did have an overlay uh write-back, whereas in the second quarter then we reallocated uh most of that all most of that overlay into those related to the Middle Eastern sort of uh conflict. Uh so that change uh resulted in about a 200 million uh variance uh on a Q-on-Q uh basis.

On the recoveries, we did record significant recoveries both uh in Indonesia and also uh Singapore. Similarly, on a year-on-year uh number, retail is predominantly driven by the timing of the overlay.

Last year, we had a 200 million ringgit overlay write-back, that's number one, on the retail side. Uh number two, if you recall, I did mention that we had a model enhancement and that resulted in 100 million write-back in 2025.

Uh so the absence of that, plus the additional the reallocation of the overlay that we took uh in the first half, resulted in the increase, together with the 60 million uh auto uh change in treatment uh that we have to make uh in Indonesia. The increase in recoveries, uh that's related to the second-quarter number, which is the Indonesia and Singapore.

I think most uh importantly, if you look at our gross impaired loans ratio, on an underlying basis, that has continued to slightly improve uh during during the quarter, and our allowance coverage is close to the 100% uh level. On the next slide, slide 15, on total asset growth, uh so apart from loans, that securities was a big was a major driver, and that's mostly coming from Malaysia and Singapore.

Uh on gross loans, on slide 16, if we break it down uh by the by the segments, in consumer banking, both Q-on-Q and year-on-year, that's driven by Malaysia and Singapore. Uh commercial banking, uh both Q-on-Q and year-on-year, we have relatively robust growth in Singapore.

Uh it's still fairly moderate uh during the quarter for Malaysia, as what we had seen uh in the first quarter on commercial banking. Wholesale banking is a big driver.

Uh overall, uh during the quarter, it's mostly coming through from Indonesia and Thailand in wholesale banking. On the year-on-year basis, that's mostly coming through from Malaysia, growing at 8.1% uh year-on-year.

Breaking it out by country: uh Malaysia, uh consumer growing at 4.3%, uh Malaysia wholesale growing at 8.1%; uh Indonesia, that growth is mostly driven by wholesale banking, whereas consumer is slightly contracting; uh Singapore, uh consumer Singapore growing at 14% uh year-on-year, and commercial banking growing at 11% year-on-year; in Thailand, the headline negative growth is really driven by consumer, offsetting that is wholesale banking, growing nicely at 14% uh year-on-year. On deposits, on slide uh 17, growth on CASA continues to be uh positive at 40 uh basis points.

Uh for the second quarter, uh commercial banking uh has done uh very well across our key operating markets, driving uh that growth. Similarly, Thailand wholesale banking also uh driving that uh CASA growth.

However, you can see our CASA proportion has come down uh slightly during the quarter at 42.6% as we continue to ramp up on the retail FDs. You can see on terms of total deposits, our growth is at 2.1% with consumer banking growing at 1.1% where most of that is ramping up our FDs on the on the Malaysia consumer side.

Secondly, you can also see wholesale banking where the wholesale funding has also picked up uh during the quarter to fund our total asset uh asset growth. Slide 18, uh dividends, as what you've already heard, we maintain our payout of 55 uh percent, which is equivalent to 2.1 uh billion ringgit.

On slide 19, in terms of our capital and liquidity, uh that remains uh very strong, with our liquidity profile uh further improving. Now, breaking it down uh on slide uh 20 on our performance uh by segment, uh firstly, on on consumer, uh the strong PPOP growth uh uh on a Q-on-Q uh basis uh that's driven by NOII uh growing by uh 10% uh driven by that lumpy uh income.

Uh on the operating income on a year-on-year uh basis, it is facing some margin pressure, uh so there is some NII uh contraction. However, on fees, which is driven by wealth in Malaysia and Singapore, overall NOII is actually growing by 12% uh year-on-year.

Fees uh is one component of on wealth, uh the second component is the other income that's driving the strong uh NOII growth, partially offsetting that NII pressure that we see uh on a year-on-year uh basis. Uh and on the bottom line, uh where on a year-on-year basis is negative, is because of the absence of the write-back that we had in terms of overlay and also the model uh enhancement that was recorded in 2025.

On gross loans, uh the bigger driver is Malaysia at 4.3% and also Singapore growing at 14%. CASA Malaysia is driving that growth at 4.3 uh percent.

Commercial banking on slide uh 21, uh during the quarter, NOII on fees and FX uh was strong, uh growing at 13% uh year-on-year, uh driving the operating income uh growth. Uh uh on the on the PBT number uh being lower, that, I mentioned earlier, we did have a write-back and also recovery overlay write-back and also recovery during the first uh quarter.

Uh and during the second quarter, we did reallocate uh some overlay. The the movement of that impacting the PBT growth on a Q-on-Q uh basis.

Uh on a year-on-year basis, the flattish uh growth uh on operating income is driven by margin compression. Uh NOII uh is also lower because we had some NPL sale gain in 2025 in the commercial business, but like what I said, in terms of fees and FX, uh the operating the NOII is actually stronger on a year-on-year basis for commercial uh banking.

The gross loans at 3.3%, uh that's mostly driven by Singapore. Malaysia remains fairly uh weak at 1% growth year-on-year, a reflection of the the the the the environment, and also some of the timing of disbursements.

On CASA, that strong year-on-year growth is across our key operating markets of Malaysia, Indonesia, Singapore, and Singapore. Slide 22, uh on wholesale uh banking, uh un- the the underneath that Q-on-Q and year-on-year number, uh treasury and markets is strong, uh driving the operating income growth, where the offset is coming through in terms of the year-on-year number where it's flattish growth is actually where the corporate fees in Singapore uh is weaker, offsetting the growth on the treasury and market side.

Uh PBT growth is strong uh because of the second-quarter recoveries uh that I mentioned that came through in Indonesia and also uh Singapore. Gross loans, uh that is mostly driven by Malaysia at 8.1%.

Indonesia during the second quarter uh was also strong. CASA growth, mostly driven by Malaysia, growing by 13% uh year-on-year.

CDA and uh Group Funding on slide 23, those central costs uh that I mentioned related to the transformation costs in Thailand, and also some of the central uh costs on terms of uh provisioning, on cost, on OpEx, you can see that has translated to that 25% Q-on-Q growth in OpEx, and also 26% year-on-year uh OpEx, and that's mostly at that uh restructuring uh side. Uh and that has impacted uh the bottom line uh where it has moderated in terms of PBT growth.

Uh but if you look at Touch 'n Go Group uh specifically, uh the trajectory of profitability has continued, uh with the year-on-year growth in profits more than uh double. Uh if you look at some of the drivers in terms of payment value, that has continued to grow very well both on a Q-on-Q and year-on-year uh basis.

Lastly on Islamic, on slide uh 24, uh the operating income growth is mostly driven by uh NOII. A lot of the overlays are being done uh at um Islamic, impacting the bottom-line uh growth, you can see both on the Q-on-Q and year-on-year uh basis.

Uh financing continues to be good, mostly driven by Malaysia uh consumer. Uh a lot of the FDs uh or or term investment account, TIAs, uh that have been built up during the second uh quarter, uh is translating into that Islamic deposit strong growth of 9.2% uh year-on-year.

With that, that's the end of the financials. Uh thank you, and I pass the presentation back to to Novan.

Thank you very much, uh Khairul. With that, uh we maintain our 2026 uh guidance uh that we have provided uh earlier this year.

Uh and that's, really on the back of our For- Forward30 execution being firmly on track. In fact, we are seeing all the benefits uh In fact, the resilience of the second quarter and the good momentum that we're seeing uh is is is really showing the benefits uh of the Forward30 execution.

Um I've always mentioned Forward30 is all about the 4Cs, capital, cash, cross-sell, and capabilities. All this is to drive long-term uh sustainable shareholder returns.

On the capital side, we are always looking out at our underperforming businesses, businesses that will struggle to scale, uh and we are taking decisive action. Um for example, we divested out of the Thailand auto business, uh that is, on track uh to be completed uh in in a few months.

Uh that capital, uh will then come back, and will be reallocated into other growth areas. If there is excess, post us evaluating our business, like how we have proven in the past, that excess uh could go back to shareholders.

Uh but the priority will always be on us reinvesting for growth. The one area that we have really focused on uh over the last few months is really to double down on our unique um uh digital proposition, uh which is both the universal bank uh as well as Touch 'n Go.

As Khairul uh mentioned earlier, uh Touch 'n Go Group is really outperforming uh since they broke even uh not too long ago. Uh the next two Cs on cash and cross-sell, these are areas where we continue to have a lot of relentless focus.

Uh on the cash side, uh we have our OCTO consumer app, OCTOBiz uh app for businesses, and Touch 'n Go. All our uh consumer-facing apps are already uh next-generation ready.

Uh and and and the simplified journeys, uh the easy to use, uh are all uh contributing towards uh the increase uh in our in our cash uh uh franchise. Um the focus on cross-sell, a lot of it has been on the wealth areas, a lot of it has been on the wholesale uh advisory areas, a lot of it uh has been also coming uh from our cross-border uh flows.

Uh uh FX, uh through the treasury client sales has been a big contributor, and this has allowed us to capture the growth opportunities that we're seeing across ASEAN uh at the moment. Then, the fourth C on capabilities, this is all about becoming simpler, better, faster.

This is something that we're very obsessed about. Uh we're starting to see it in the numbers.

Uh we are able to extract value from it. OpEx is declining.

Uh and and that includes a lot of one-off transformation costs in there at the moment. Uh but as all this one-off transformation cost roll off, we can expect to see OpEx declining further.

Uh and then lastly, uh this is with regards to the 2 billion capital return plan uh that we announced in November last year. Uh we started with 700 million, we have 1.3 billion to go.

We are committed uh to execute uh on this plan supported by our current strong capital position. With that, um that is the end of our presentation uh and look forward to your questions.

Thank you.

Thank you, Novan and Khairul. Um we will now begin the Q&A session.

Just a reminder, if you'd like to ask a question, please use the raise hand function, and we will unmute your line. We have a few raised hands here uh open.

Uh the first one comes from uh Peter Kong from Kenanga. Peter, are you there?

Hi. Uh uh good afternoon, CIMB team.

Uh perhaps, just let me start with uh two questions. The first one is a little bit more housekeeping.

Uh I uh attended the recent uh Niaga briefing, and there was a a reduced guidance uh in terms of uh the concern on credit cost. There was a very specific reason for the credit cost uh increase, uh which was relating to a uh OJK ruling on some of the uh vehicles repossessed, previously treated as inventory that now needs to be treated as a loan.

If this uh inventory uh vintage is more than 180 days, then it becomes impaired, etc, etc. I was just wondering, uh when it comes to the group level, uh how much uh has uh this uh change in accounting rule uh affect your credit calls at the group?

Uh and would like to hear uh whether or not this actually increases your credit calls. It's only a timing issue, cuz you will later get it in your other income as well.

Just to hear your thoughts on that. Uh my second question is relating to uh some of the uh uh I would I would say the the environment that we have we are in today.

Uh we do see some of the banks that have reported before you uh strike a bit of a more cautious tone with regards to NIM uh going forward. I uh note that uh that one of your slides on liquidity coverage ratios, uh especially for CIMB Bank, uh CIMB Islamic locally, uh they seem to be still on an increasing trend.

We see some of your other competitors uh have already started to allow their LCRs to come off a bit. I was just wondering why is there such a divergence?

Is there scope for you to maybe uh um optimize this as well as we go ahead uh uh if that environment gets a little bit more challenging? Uh so, those are my two questions.

Thank you.

Okay. Uh no, thank you uh, Peter.

Uh on your first question with regards to the new um OJK rulings on uh multifinance companies. Uh so, yes, you're right.

Uh it is uh it is a timing issue, and it hits different uh parts of the P&L. Uh what used to hit us at the NOII line uh post uh the sale of the vehicle um now instead uh will hit us at the ECL line.

It's different parts of the P&L, uh but it's a timing difference. Uh nonetheless, it will uh increase um the ECL line for Indonesia.

Uh but, given we are a large, diversified group, of course, there are other areas uh that are that are doing better, and therefore, our overall group guidance for credit costs uh will remain. Uh but you are right, Indonesia specifically, uh there will be an impact because of the changing of the impact of the of the P&L lines, but it is it is a timing uh issue.

Just to add in terms of the number itself uh during the second quarter, we do, of course, take it directly to the group, right? Uh so for the second quarter, the number that impacted that retail uh ECL number is 60 million ringgit uh for the second uh quarter.

Like what Novan Novan said, we are a diversified uh group, and from an overall perspective, our credit charge uh guidance has been maintained at 25 to 35 uh basis points. We are getting, during the second quarter, good recoveries uh coming through uh from Singapore.

Uh so that has offset some of that downgrade in guidance, if you want to say, in Indonesia uh in terms of that credit cost uh guidance. Uh so, the second one in terms of our our our LCR.

There are many components to our to managing our our liquidity. I think from from an overall NIM perspective, you look at our second quarter and also LDR LDR/LCR, that has improved uh during the second quarter, and this is funding our total assets uh growth during the quarter, and also, given the pipeline that we're seeing uh for the for the third quarter.

We have uh built up some of the wholesale uh funding side, which is positive because on the LDR, wholesale funding is part of the LDR. On on LCR as well, wholesale funding is part of that.

However, we do manage our liquidity also on an NSFR uh basis, which we don't uh disclose, and most banks do not disclose the NSFR. We are still very optimal in terms of our NSFR.

It is uh stable. Uh it's not declining or improving.

Uh so that's another uh area of consideration when we manage our our liquidity. In terms of the optimal level of liquidity, we are maintaining that uh optimal uh level, and we will continue to do so, and that's where, we'll continue ramping up in terms of our retail deposits, and also CASA from an overall perspective.

On your question on the NIM, yeah, I saw I saw the various results on the street. Also, uh yeah, results are mixed.

Uh I hear you on the NIM cautious tone. We are also, I guess, cautious.

Uh our NIM uh for Malaysia declined 3 basis points uh for the first half, from 1.8 to 1.77%. Um uh and I think the reason why we managed to defend that NIM is also as a result of our focus on our cash strategy, as part of the 4Cs uh for Forward30.

It's really going out there to win cash uh without rates, uh and it's not easy, but it's something that, the entire um troupe is all is all uh relentless and focused on uh uh which is which is why I think, we've we've we've managed uh the the NIM compression well. Having said that, look, I think this is something that we continue to be vigilant uh, and we want to continue to defend uh um uh and and and uh, this this is a key part of our our 4Cs uh execution.

Thanks for the insights, Novan and Khairul. I'll jump back to the queue.

Thanks, Peter. Uh our next question comes from Akash from UBS.

Great. Um thank you for taking Hi, Steven.

I hope you can hear me. Um thanks for taking my question.

The first one is just on provisions. Apart from that 60 million um provisions for the retail sector that you said was because of Indonesia regulations uh things, I think there was um other increase as well in the provisions, right, for other sectors, including retail.

I'm just wondering if there's any um underlying deterioration that you're seeing um and um, provisions overall are running very close to the top end of your guidance. If this sort of credit quality deterioration continues, is there a risk that we might miss the guidance for the for the full year?

That would be my first question.

I think uh where we have uh been uh conservative is in terms of our reallocation of overlays, right? It is the timing of that reallocation.

If you look at uh first quarter, uh we did have uh some write-backs both coming through on the retail side and also on the non-retail side. The the the pickup that you see on a Q-on-Q basis, number one is the one that we we discussed in terms of that OJK change in treatment, but predominantly, right, the major driver is really our overlays, uh and that is pre-emptive.

To your question, if you do see So for now, our underlying uh asset quality has remained uh from a broad perspective stable. Uh we do have that overlays that we have already booked uh during the second quarter.

If we do face any uh any deterioration in certain segments of uh asset quality. Both on retail and non-retail, we've put aside those uh overlays uh related to any inflationary pressure coming through from, the macro backdrop coming through uh on the uncertainties of the Middle Eastern uh crisis.

Uh and that's where, if there is any deterioration, uh but for now we're not seeing any, uh this is will provide us that buffer uh to take on that deterioration of asset quality.

Very clear. Thank you.

Second question is on the net interest margin. Just based on your current view on the deposit competition, um when do you expect the Malaysian NIM to trough?

Or do you think this compression in NIM continues for the next one to two quarters?

I think um overall, right, I think just to to to to to be clear uh in terms of that uh the view on on NIM and LCR, I think uh we are looking on a full-year basis at the group at at the group. Uh we do look at margins year-on-year to be flat to to -10 basis points contraction for the for the full year.

Uh as at half year, we're already seeing the 10 basis points uh margin contraction uh being translated. Uh we do have uh some levers uh to mitigate uh any further pressure coming through uh in Malaysia.

Those levers uh are two-prong. One is in terms of the FDs, we do want to uh ramp up a bit on our FDs because we have raised a bit more of the expensive wholesale funding.

We've managed if we manage to optimize that in the coming quarters with that strong execution on FDs, that will mitigate uh some of that headwind uh that the industry is talking uh talking about, that's number one. Uh number two, uh CASA in Malaysia that has continued to be strong, we do need to uh double down in terms of our CASA growth during the second half uh of the year.

These are some of the levers that is in execution uh to hopefully give that stabilization uh of NIMs. Uh the competitive environment is still very dynamic both on the wholesale funding side, and also on the on the retail side.

Our expectation is that there could be some small pressure coming through uh a few basis points, but we are relatively optimistic that we can get table margins from where we are at today of the second-quarter uh numbers with that execution of FDs and CASA.

Understood. Thank you.

Third question is on wealth. Um so wealth has been, a key growth driver for yourself, and in this particular quarter, we saw a good level of strength for you and for the sector in general.

Just trying to understand how much of this do you think is market-related versus how much of it this is really sustainable, structural, genuine inflow um that is happening? Any any thoughts on that would be very helpful.

Thank you.

Yeah. Um big picture, certainly I think ASEAN is seeing uh some level of inflows.

Uh the disruptions that uh we're seeing in the Middle East, some diversifying away from um from uh from from from the US, uh although that is still predominantly the market, but there's some diversifying away. Even at the margins, it still makes a difference.

Um so I we do see uh structurally, a lot of these shifts coming to ASEAN. Uh of course, there are winners and losers within ASEAN.

Uh and at the moment, I think the two big markets that is getting a lot of uh inflow is number one Singapore, where we have uh where we do have a strong presence as a challenger bank, uh and secondly, also, to some extent Malaysia. Um so so we are we are seeing, macro-wise, uh some inflow as part of structural shifts within ASEAN.

Then, whether is it sustainable or not, then that depends on the strength of the franchise. That is where CIMB is different compared to a lot of our peers in the region.

CIMB is always known as a strong wholesale bank. Uh wholesale bank is our specialty.

Uh we bank all the top issuers in the region, uh and, we advise top issuers in terms of issuances of, for example, capital market instruments. Um we package all these uh uh instruments ourselves into wealth products that can that can uh gets distributed uh to our customers.

Um unlike, a number of our peers that actually white-label products from other financial institutions, we are we at CIMB manufacture and and and package uh the products ourselves. That is one key difference between CIMB and our peers, and I I'm I'm I'm I'm a big believer that and I'm and I'm confident, in fact, that this is what differentiates us versus everyone else.

Number one, there's been there's been inflow. Number two, to keep the inflow, you need the products, you need the the franchise, and and and that is where we are differentiated uh versus the rest.

Then our locations, right, of Malaysia, Singapore, where where we we we we leverage a lot on the Malaysia-Singapore corridor, we leverage a lot on the Indonesia-Singapore corridor, that is another part of our endowment uh that differentiates us.

Great. Thank you.

That was

It's one part of the business that uh, we are this is a key pillar for us under Forward30. It's a key pillar under our third C of cross-sell and the second C of cash.

Uh and and and is a big focus for us. That's why we introduced the new segment called private wealth uh about a month ago.

Because we were banking the preferred banking well, we're banking the private banking well, but then we then realized that there is a category in the middle uh that that that that is also very large, and and and and probably less tapped. Uh and we're playing in that segment now.

Great. Thank you.

Very clear. Just last question, if you could share your latest thinking on uh capital allocation, specifically with regards to Niaga and uh TNG Digital?

First, we are always on the lookout of underperforming businesses or businesses that will struggle to scale and and and win over the next few years. We demonstrated that we demonstrated that first with Thai auto.

Uh we are evaluating options for uh for for other areas as well. Uh and at the right timing, of course, we'll make the necessary announcements.

Um but, using Thai auto as an example, we are down to to to complete that uh in a in a few months. Uh we'll then go through the process of repatriating that capital uh back to group.

Uh that capital then needs to be reallocated to other growth areas. Uh and and and that is what we are evaluating right now.

We have identified some of the areas that we know we can win, uh and and and we'll make the necessary announcements uh at the appropriate time. Uh and then, once we've exhausted that and there's still excess capital, as we have proven in the past, uh we will then uh consider to return that uh to shareholders.

Only after going through uh that thought process. Touch 'n Go, that is something very special that CIMB uh has in our platform.

Uh compared to any of our peers, everyone, is a universal bank, they have their digital offerings. We have our universal bank and digital offerings together with Touch 'n Go.

Touch 'n Go serves two out of three Malaysians. It is the dominant e-wallet in the country.

Uh uh that is perform that is performing very well. In fact, it's outperforming beyond uh, what we have projected for since it broke even uh not too long ago.

Uh as Khairul mentioned, year-on-year um uh growth in profits more than 100% in the first half. It's hit 90 million profit.

Uh we are seeing a very strong trajectory there. That's certainly an area that, as I mentioned earlier, we're going to double down further to leverage on the strengths of our universal bank platform and the Touch 'n Go platform.

With regards to Niaga, uh look, Niaga is an important part of the business. It is facing headwinds and challenges today, both on macro front on the macro front as well as, FX when we convert the Niaga results back to group.

Uh but look, at the end of the day, we are in Indonesia for the long term. Uh there are short-term challenges uh today.

Uh what's most important is we remain close to our customers. Uh we make sure that we bank uh the right customer segments uh within Indonesia uh uh and and and and we make sure that, we grow responsibly, we grow safely.

Uh that is basically the focus uh for for Niaga.

Thanks very much. That's all my questions.

Thanks, Akash. Um can we move the line to Jin Han of Affin, please?

Jin Han?

Hi, Novan. Hi, hi, Khairul.

Hi, Steven and team. Um a few questions from me.

Um one The first question would be uh there's a lot of noise in the loan loss charge up to first half. Would it be possible to actually deconstruct that credit cost on an underlying basis, excluding um any kind of uh overlay write-backs or reclassifications?

What What What would the underlying credit cost actually look like? Looking at looking at the your December balance of about 984 million in overlays at the time, I think that's accounting.

How far away is the current base from that level?

I think in terms of the that charge uh because there is a next net overlay charge, uh I think if you exclude the noises, right, and if you also exclude the significant recoveries from Indonesia and also Singapore, uh from a credit cost perspective, it is uh very stable uh Q-on-Q.

Got it. Got it.

How far is uh the current overlays from that 984 December number currently?

We have We made a net uh addition uh to the December number.

Got it. Um second second question will be do note the new guidance of of uh flat to -10.

Um please do uh uh correct me if I'm wrong, but I think previously it was -5 to +5. With this new this relatively new uh target in mind, would where does net interest income uh point to in terms of that growth?

Are we still looking at maybe a mid-single-digit kind of contraction, including FX? Or you think it could actually get better?

Two two things, right? As you can see uh on on Novan's last slide, our our guidance has remained uh constant, right, versus last quarter.

As what you rightly pointed out, it's only the NIM that has come off in terms of guidance, right? Uh the offset is coming from two parts: one is the total asset growth, and this is back to Novan's point in terms of, leveraging our ASEAN platform and ASEAN flows, and that has been uh fairly good in terms of total assets.

We are we're we are at the higher end of our 2026 guidance in terms of total asset growth, so that's that's number number one. Uh number two, our NOII growth has also been good on the wealth side and the client franchise uh side.

If you look at our NOII growth uh for for the year uh versus our earlier uh expectation, uh this has also uh been good where the second-quarter trading number, even though down, is still very well uh supported at a at a decent uh level. That is where the offsets are coming through from our guidance of NIM coming off, and hence why the guidance that Novan uh highlighted has been constant versus last quarter.

Got it. Got it.

Uh sorry, just bear with me, one last question in terms of the wealth income because I think the chart is actually relatively new. Uh would like to understand a little bit is in terms of what the splits look like between the various kinds of primary products, things like bancassurance, uh unit trust, structured products.

A little bit more color into what actually provides more contribution and what provides less will be great.

Good question. Uh we do have that those numbers, but we are I mean uh displaying or disclosing this in phases, right?

As what you rightly pointed out, those are the main components of that wealth number. Uh as and when uh we start, gaining uh further traction and we can talk about some of our plans in those certain uh areas, we will start disclosing a bit more in terms of the breakdown of that wealth uh component.

Then yes, as you rightly pointed out, this is a new uh disclosure where we want to highlight our traction on the wealth uh business.

Jin Han, I uh it's it's as you rightly pointed out, it's a new disclosure, it's evolving. Uh we've started disclosing it on the NOII side, but of course the wealth business have components of NII and NOII.

I think, we are we're seeing how best to do this separate wealth disclosure, uh but but but but yes, um we will be going into those uh further uh details um uh I think in our next uh our next presentations.

Got it. Thank you so much.

Thank you.

Thanks, Jin Han. Uh the next question comes from Harsh.

Harsh Modi, J.P. Morgan.

Harsh, are you there?

Hi. Thanks.

Thanks. Um one question.

Uh free float uh requirement in Indonesia uh a bit of a tough one to deal with right now. How are you thinking about it?

Can you get exemption, and if not, what are the possible options there? Thank you.

Uh

we are exploring all options, Harsh. Uh so at the moment, uh we we we we are exploring how it could be like uh if there was a capital market uh trade, uh but not a typical type of uh capital market private placement where you place at a discount to the current price, which is illiquid, uh but more uh a re-IPO type of uh trade, uh where it's based on our ROE as opposed to based on the current trading price price, which is not reflective of the fundamentals of the business.

That is one. Uh we are also, uh um speaking uh to the regulators uh with regards to uh what do we then uh discover during this exercise.

We are we are exploring all options, uh and and and we've been doing that for quite some time now since uh since the announcement of the of the rules came out.

Right. Basically, I know long, long time ago, CIMB was able to place, I want to say, at a premium to one of the Japanese banks.

Something on those lines uh based on underlying profitability if there is a strategic investor who comes in and buys, but it it's tough to and strategic investor won't be free float, right? Basically, you had to sell above current price for you to get a fair value, but that seems very tough.

The only hope is regulator agrees that it is very tough to do it in a commercial manner and gives exemption, but if they don't, then it's a it's a really tough uh choices to increase free float in either way, right?

I don't see it that way, Harsh, because it could be a placement to a few institutional investors, or you want to call it strategic, right, and and still satisfy the free float definition. Uh so, it could also take that form, Harsh.

Uh but more importantly, is we need to explore all options, and we then need to assess it, and we will be discussing with the regulator with regards to uh, the best uh option to take.

Got it. Thank you.

Yeah.

Thanks. Um we have no other questions at the moment.

Uh just a reminder to everyone, if you have a question, please raise your hand, use the raise hand function.

Sorry, if there are no questions, can I take one more?

Um

more on on the operation side of it. Um it seems, uh Niaga numbers are fine, group numbers.

There seems to be a very significant um shift in the way deposits are raised or funding is raised in Malaysia. Um could you talk both in Indonesia and in Malaysia how is the overall funding environment shifting because in Malaysia we have moved to loan to funding?

People looking more at LCR, NSFR, rather than BNM focused on LDR. KLIBOR has moved up beyond the rate expectations.

Indonesia, we know funding situation is tight. In both of these markets over next six months, should we expect overall cost of funds to go up or not really, and what are the drivers uh of in in in of funding in particular and a bit more granularity as to how you're thinking about these two?

Thank you.

From a Uh Hi. From a sector uh perspective, right, we go country by country.

In Indonesia, I think the competition still remains uh very stiff, and liquidity still uh remains uh remains tight. We continue to have uh having to increase in terms of our FD rates uh to continue to get uh those uh volumes uh coming coming through.

From a headline perspective, uh yes, there is uh that that that headwind coming through, but we have two levers uh in Indonesia, one well, three levers. Uh one, fundamentally, our CASA growth uh in Indonesia has been good, and we continue to double down that fundamental strategy of of CASA CASA growth, and that is mostly on the wholesale side, but to a certain extent on the consumer side uh as well.

That's that's that's number one, that's long-term, and that will have also an impact a good impact in the second second half of the year. Uh two other things is in terms of our repos.

We did build up a bit of our repos during the second quarter, and now as we start, building up our FDs uh which is still cheaper than the repos even though with that repricing up, we will we will manage to optimize the the the cost of our liabilities uh overall. That is that is good.

Thirdly, what we haven't done what we haven't executed fully is the repricing up of loans. We have done that a bit during the second quarter and towards the beginning of third quarter, but there is still a lot of opportunity uh to do so.

Uh but that is, of course, uh subject to the competitive environment as well, but there is one lever that we are also looking at in terms of repricing up the loans where we uh have that those bilateral uh agreements uh with that 100 basis points uh rate rate hike. These three things will uh partially or may offset uh some of the liquidity uh pressure that we see in in in Indonesia.

Now, moving on to to Malaysia, uh there is some uh pockets. Liquidity at the system level remains stable, right, for Malaysia.

There's no tightness in liquidity, just to be very clear. There are some pockets or segments where the competition is fairly stiff.

Uh we are, competing for those uh deposits. Number one, as what you may have alluded to, KLIBOR is going up, wholesale funding, there is some competition on the wholesale funding side.

Uh so that's where uh there will be a creep up in terms of the rates. That's where the offset is us ramping up on the retail FD in the second half.

We've pruned that very well in the second quarter. We're going to continue growing the retail FDs, and that's where the opportunity to offset uh some of that headwind where we are able to attract some of that wholesale funding that we built up in the second quarter.

That is the the the the the plan uh to offset some of the headwind in Malaysia.

Yeah. We have also other levers, Harsh.

One of it is Singapore as a branch uh for for Malaysia. Singapore has seen a lot of uh deposits due to the fact that it's a very liquid market.

Uh so that is also another lever for us uh to raise deposits. Uh we've also been um uh raising deposits out of Hong Kong.

Uh and and and and we do then use that to fund some of our our assets. We are also using our offshore uh offices where where the liquidity is uh a lot more um uh flush uh to raise uh deposits.

The point on Malaysia is there is liquidity. The question is price, uh and therefore, it goes down to deposit type, and that's why it's retail CASA and FD that is crucial, together with commercial, and those are the areas that we are doubling down on uh in the second half.

Thanks. If I could just understand, what does that mean for half-on-half NIMs?

Do you think we can improve from here? Uh With the

Yeah, I think uh Harsh, with the execution of uh those uh offsets, right, both in Indonesia and in Malaysia, uh I think we can uh we are targeting for half-on-half or sequential uh NIMs to be relatively stable.

That's it. Uh if I may, one last question.

Any trends in asset quality and overall uh credit, it's okay, but any particular segments in any of your core markets which are um flashing amber, or everything seems to be moving to green? Uh

in terms of asset quality, there there is nothing sporadic that is causing it to be flashing uh amber. Uh there are certain one-off cases, very specific cases uh that we are dealing with, which is what you would already see uh in the in the current asset quality uh numbers.

Uh there are also uh previous uh products that we were growing in the previous years uh that, that that you would see uh uh heightened asset quality numbers in the current numbers, which we have already stopped. For example, fintech lending, which we actually used to grow in Indonesia quite a bit, we have stopped that uh at the start of this year.

Uh but but but but we're seeing the remnants of the of the of the ECL in the numbers today, but that will basically end soon. If you're asking about something widespread, no; specific, one-off cases here and there, yes, doesn't form a trend; uh and for certain products that we know of the deteriorating asset quality, which is already reflected in ECL, we have stopped that.

That is where we are today.

Thank you.

Thanks, Harsh. I think we can take the last question from Rahul.

Rahul Jain from MAPS in Singapore. Uh Rahul, are you there?

Thanks. Uh good evening, gentlemen.

Uh thanks for uh presentation and and asking uh some good questions. Uh I just had uh two follow-ons.

Uh first is coming back to the margins discussion. Last quarter, I thought you were sounding a lot more confident uh in managing margins.

This quarter, um I think the guidance has changed. Um but at the same time, the growth guidance has been stronger.

Um so just trying to understand, um what are the underlying dynamics that are playing out? We we did see with some other banks also where the growth has been stronger, but the compromise has been on the margins.

Is it to uh take away that, banks are compromising a little bit on the margin side to fund the growth? Uh but technically speaking, um if the growth dynamics are stronger, you should be able to price up these loans um if if there is a if there is a demand-side challenges.

That's that's question number one. I have one more small question after this, I'll ask.

Thank you.

Okay. The biggest change uh, Rahul, from when we did the first quarter to now uh is Indonesia.

During a very short pri- period from May to June, uh there was a 100 basis points hike uh in in interest rates. Uh and and some of it was not expected by the market, uh but BI did it to defend the rupiah.

That then, led to some uh distortions or disruptions in how banks have been, planning uh have been planning uh funding. Uh so so that is one disruption and one change from the previous uh discussion we had where we're seeing NIMs bottoming out uh to where it is uh today.

Um and you are right. Uh to mitigate that is to then pass on uh the increase in interest rates into the loans, because the deposit hit you straightaway, but the loans will take some time for us to pass it through, especially on the wholesale side.

That is something ongoing. Uh we've already started uh passing through some, uh but there's still some way to go uh for us to pass through those rates.

Indonesia has been has been uh has been one uh has been one key area. Other markets like Malaysia has been pretty stable for us.

Year-on-year, we are 3 basis points uh compression when the policy rate went down by 25 basis points. I think Malaysia in terms of of our funding strategy to fund our asset growth has been sound, although we do have uh areas that we want to uh that we want to optimize further.

Uh and and and and we do see opportunity for that. Um uh Thailand, on the other hand, despite, having uh a lot of rate cuts, we've managed to increase the NIMs, as you can see on page 11.

It's um it's uh I mean the main the main difference was Indonesia, but that is timing, as you say, uh and it's down to execution of us passing through those loans. Uh

got it. Thanks.

Just a follow-on um uh to this point. Um if the rates uh were to go up further in the other parts of ASEAN, uh would we witness uh some more compression?

Uh is that already priced into your commentary when you say the margins are going to be relatively stable in 2H? If if it is, then would it be in the later part of the 2H or, from now itself you should be able to manage the NIMs better?

Thanks.

That's taken into account, Rahul. It's taking into account the rate uh outlook in terms of our guidance uh for the for 2026.

Uh but I think the biggest driver, of course, Indonesia being one, uh but Malaysia, we are expecting rates to be stable. Uh if we do get a rate hike in Malaysia, it's actually positive.

Uh it will be positive to the tune of 80 to 100 million uh ringgit on an annualized basis. Got it.

Got it. The other question I had was on the capital allocation.

Um you did a good job on in Thailand, um but let's say if I take a three years' view, uh can you just quickly refresh um how the how the RWA mix could look like, how the PBT mix could look like? Uh there's been some good progress on on the fee income side as well.

Capital allocation and the and the PBT break up the next three years, how would it look like to the investors? Thank you.

We are actively evaluating underperforming businesses. It could be countries, it could be segments within countries like what we done in Thailand.

Uh and we are evaluating how that could look like in the next few years. Uh we are and and and we will be considering those options, right?

Very difficult uh for me to give you a sense of that breakdown now because uh we I we do anticipate changes in the portfolio over the next three years, and that changes will then lead to differences uh in in capital allocation. I think the the takeaway here is, uh will there be further changes to the portfolio and how it get allocated?

The answer is yes. Uh where will it be?

I'm not in a position to disclose at the moment.

Got it, but just to reconfirm, that'll be ROE accretive, I suppose.

Yes. We are evaluating areas that are ROE destructive, and we are seeing if there's a chance for it to be ROE accretive.

If if it cannot, and it cannot be scaled also, then like what we did with Thai auto, uh that will be the action that we will take. It will be decisive.

There will be changes. I'm just not at a I'm just not in a position to tell you where are the changes right now.

If you look into our portfolio deeply enough, you probably could get a sense, but I'm I'm not going to disclose that at the moment. I'm not in a position to be able to disclose that.

No worries, very helpful. Thank you so much, and good luck for the future quarters.

Um thank you. Thank you, Rahul.

That's uh last question for today. I would like to pass the line back to Novan for his uh closing remarks.

Thank you very much, uh everyone, for joining us uh on uh on a Friday afternoon. Uh fellow Malaysians, I would like to wish everyone Selamat Hari Merdeka.

Uh enjoy the long weekend uh with your family, uh and I look forward uh to meeting all of you soon in our future engagements. Thank you.

Ladies and gentlemen, that concludes our briefing for today. Uh once again, thank you for joining us.

Uh we wish you a very good evening ahead.