August 29, 2018 / 7:01 AM / 25 days ago

UPDATE 2-Malaysia's CIMB posts higher quarterly profit, on track to meet 2018 targets

* Gains from recent deals drive quarterly net profit growth

* Net interest income down 6 percent for the quarter

* CEO confident of meeting 2018 loan growth target

* Says capital markets improving from weak first half

* Shares rise as much as 1.8 percent (Adds CEO comments on outlook)

By Rozanna Latiff

KUALA LUMPUR, Aug 29 (Reuters) - CIMB Group Holdings Bhd , Malaysia’s second-largest lender, posted its best quarterly profit on record helped by one-off gains from recent stake sales in joint ventures and said it can meet its 2018 loan growth targets.

The bank’s optimistic outlook lifted its shares, which had been weighed down in recent months by weakness in capital markets and lingering policy uncertainty from Malaysia’s first change in government in sixty years following the shock ouster of Najib Razak as prime minister in May elections.

CIMB’s stock rose as much as 1.8 percent on Wednesday to a two-month high, even as the broader market fell 0.5 percent.

CEO Zafrul Aziz said he was optimistic about the bank’s performance in the second half.

“It’s only been the first two months into the second half, but judging from the pipeline that we have, we should see at least the same if not better performance in the second half,” he said at a press conference.

The bank is on track to meet its full-year loan growth target of 6 percent, he said.

Zafrul said the Malaysian capital market has seen an uptick in the last two months following a weak first half. The consumer side of the business has been positive since the general election, possibly due to higher consumption, he added.

CIMB’s net profit for the quarter ended June rose to an all-time high of 1.98 billion ringgit ($482.34 million), compared with 1.1 billion ringgit a year earlier, the bank said.

Profit was boosted by gains from the sale of part of CIMB’s stakes in two asset management joint venture units to U.S.-based partner Principal Financial Group.

Excluding gains from the deals, profit totalled 1.05 billion.

Net interest income fell 6 percent for the quarter, while income from wholesale banking fell on weak capital markets.

But concerns remain as Malaysia’s economic growth is expected to slow this year.

Malaysia cut its growth forecast for 2018 and reported a slower second quarter two weeks ago, on the back of external jitters and uncertainties surrounding the new government led by Mahathir Mohamad.

A slowdown in the domestic market could weigh on the banking sector for the rest of the year.

Zafrul also said in a statement that CIMB is “relatively cautious on 2018 growth prospects in view of rising global trade tensions and market uncertainties.”

Malayan Banking Bhd (Maybank), Malaysia’s largest lender by assets, is due to report quarterly results on Thursday.

$1 = 4.1050 ringgit Reporting by Rozanna Latiff, A. Ananthalakshmi and Liz Lee; Editing by Himani Sarkar and Sunil Nair

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