RAM Ratings raises outlook on CIMB Thai's AA2/P1 financial institution ratings to positive

RAM Ratings has revised the outlook on CIMB Thai Bank Public Company Limited's (CIMB Thai or the Bank) AA2 long-term financial institution rating to positive from stable, while affirming all ratings. The outlook on the Bank's RM2 bil Tier-2 Subordinated Debt Programme, rated AA3, has also been revised to positive. 

The positive outlook reflects our view that the planned divestment of its loss-making auto finance business, together with broader strategic initiatives to strengthen profitability, is credit positive and should structurally enhance asset quality and earnings profile. In May 2026, CIMB Thai announced the sale of its automobile financing portfolio, representing around 13% of gross loans as at end-December 2025, with completion expected by year end. 

Despite accounting for less than 15% of total loans, the auto segment generated more than 70% of loan-loss provisions during 2023-2025. We envisage credit cost ratio to decline to 40-45 bps, from above 100 bps in the last three years. Management expects this, along with efforts to expand fee income, enhance cross-selling and streamline operations, to lift its after-tax return on equity to 10-12% by 2027 (FY Dec 2025: 4.5%). This is equivalent to a pre-tax return on assets of around 0.8% (FY Dec 2025: 0.5%) at the lower end of the management's target range. While the transaction modestly reduces business diversification, we view the impact as limited given the sub-scale and weak risk-adjusted returns of the auto franchise.

The divestment forms part of CIMB Thai's strategic repositioning towards a more focused business model following a prolonged period of weak profitability. Management is prioritising wholesale banking and wealth management, where the Bank can pursue higher risk-adjusted returns and leverage the CIMB Group Berhad's (the Group) ASEAN network. It also intends to optimise capital, targeting a comm