Malaysia's Biggest Bond House Sees End to Post-Election Doldrums

(Bloomberg) -- Malaysian capital markets are finally shaking off the lull that followed Prime Minister Mahathir Mohamad’s surprise election win five months ago, according to the nation’s biggest bond underwriter.

“We’re seeing a better pipeline going forward,” CIMB Group Holdings Bhd. Chief Executive Officer Zafrul Abdul Aziz said in a Bloomberg Television interview in Kuala Lumpur on Tuesday. “We’ve seen more activity happening in the capital markets, especially the treasury markets.”

Mahathir returned to power in May by toppling the government that had ruled for six decades since Malaysia’s independence, leading to uncertainty over the new administration’s policies. Bond sales have fallen in the past two quarters as companies withheld financing plans on concern over state spending cuts that have led to billion-dollar contracts being canceled or deferred.

That’s about to change as companies return to capital markets to raise funds, Zafrul said. CIMB is set to be the country’s top bond arranger for a 14th consecutive year in 2018.

Fiscal Challenges

“There’s an expectation that the government will have to address some of the challenges on the fiscal side,” he said. “But in the shorter term we still need to balance growth, so fiscal discipline is good, but not at the expense of growth.”

Greater activity in capital markets could help Zafrul achieve his target of booking record profit this year and turning around the bank’s shares, which have underperformed its peers. The nation’s second-largest lender has slumped 7.6 percent this year, compared to the 4.9 percent gain in the Bursa Malaysia Finance Index.

Zafrul said he’s not being considered for the chairman role to be vacated by Nazir Razak by the end of 2018. Nazir, whose brother Najib Razak was ousted as prime minister in the election, said in September that he will step down after 29 years at the bank, half of which were as CEO.

“We’re at that stage now where we’re executing the succession program,” Zafrul said. The lender will announce the next chairman once the central bank approves the appointment, he added.

Zafrul is targeting the biggest-ever profit for CIMB in 2018, after net income in the first half reached a record 3.29 billion ringgit ($791 million). Profit jumped 80 percent in the second quarter from a year earlier to 1.98 billion ringgit, as the sale of stakes in asset managers helped to offset slow lending.

The bank is targeting 6 percent loan growth this year, after financing increased 3.4 percent in the first six months.

©2018 Bloomberg L.P.