May 30, 2018 / 6:02 AM / a year ago

UPDATE 2-Malaysia's CIMB logs best quarterly profit in 5 yrs, but one-off gain helps

* Q1 net profit up 11 percent yr/yr to 1.31 bln ringgit

* Cost discipline and lower provisions helped earnings

* Performance also lifted by one-off gain from stake disposal

* Shares have been hit by worries of election impact on deals (Writes through, adds election impact on share price)

By Liz Lee

KUALA LUMPUR, May 30 (Reuters) - CIMB Group Holdings Bhd , Malaysia’s No.2 lender, turned in its highest quarterly profit in five years, boosted by lower costs and provisions as well as a one-off gain from the sale of a stake in its international brokerage business.

While the results beat market expectations, they failed to lift the bank’s shares which have taken a beating since Malaysia’s general election this month on fears that CIMB, whose chairman is the brother of the former prime minister, will lose out on investment banking deals.

First-quarter net profit climbed to 1.31 billion ringgit ($326 million), up nearly 11 percent from the same period a year ago and a third higher than market estimates from Thomson Reuters I/B/E/S.

“We expect continued growth momentum in Malaysia with further improvement in loan growth and asset quality across Indonesia, Thailand and Singapore,” CEO Zafrul Aziz said in a statement.

But analysts at Morgan Stanley noted that excluding the one-off gain from the sale of a stake in its international brokerage business, CIMB’s net profit would have fallen 2 percent year-on-year.

Shares in CIMB were down 2.3 percent in afternoon trade, roughly in line with the broader market. They have lost some 14 percent since the election.

Views in Malaysia’s financial community are mixed on just how much impact the bank will see from the shock ouster of former Prime Minister Najib Razak this month.

Some bankers expect the change in administration to result in a more transparent process for deals, which would help rival banks that until now have been seen as at a disadvantage to lenders with links to the government.

Others expect little impact as group chairman, Nazir Razak, is no longer involved in the day to day running of the bank and as CIMB’s deals team is viewed as quite strong.

CIMB did not immediately reply to a request for comment about the impact of the election on its business.

The bank is expected to record several one-off disposal and revaluation gains for the year.

It is selling shares in two asset management joint venture units to U.S.-based partner Principal Financial Group for 470.3 million ringgit and is expected to log a 637 million ringgit revaluation gain on its 40 percent stake in CIMB Principal Asset Management.

These gains could help the group kick off restructuring steps such as digitalisation and cutting headcount, analysts have said.

Bigger rival Maybank reported strong first-quarter results on Monday, with net profit up 10 percent on lower expenses and impairment losses.

$1 = 3.9900 ringgit Reporting by Liz Lee; Additional reporting by Anshuman Daga in Singapore; Editing by Himani Sarkar and Edwina Gibbs

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