RAM Ratings has revised the outlook on CIMB Thai Bank Public Company Limited’s AA2 long-term financial institution rating to positive from stable, citing expectations that the planned disposal of its loss-making automobile financing business will structurally improve the bank’s asset quality and profitability.
The rating agency affirmed all of CIMB Thai’s existing ratings. It also revised the outlook on the bank’s RM2 billion Tier-2 Subordinated Debt Programme, rated AA3, to positive from stable.
RAM said the positive outlook reflects the potential benefits from CIMB Thai’s strategic repositioning, particularly the divestment of an auto financing portfolio that has been a disproportionate source of credit costs.
CIMB Thai announced the sale of its automobile financing portfolio in May 2026, with completion expected by the end of this year. The portfolio accounted for about 13% of the bank’s gross loans as at end-December 2025.
Despite representing less than 15% of total loans, the auto financing business generated more than 70% of CIMB Thai’s loan-loss provisions between 2023 and 2025, according to RAM.
The rating agency expects the disposal to have a significant impact on CIMB Thai’s credit profile.
RAM projects the bank’s credit cost ratio to decline to between 40 and 45 basis points, compared with more than 100 bps over the past three years.
The improvement, coupled with initiatives to increase fee income, strengthen cross-selling and streamline operations, could provide a substantial lift to profitability.
Management is targeting an after-tax return on equity of 10% to 12% by 2027, more than double the 4.5% recorded in the financial year ended December 2025.
At the lower end of management’s target range, RAM said this would be equivalent to a pre-tax return on assets of about 0.8%, compared with 0.5% in FY2025.
Although the sale will modestly reduce CIMB Thai’s business diversification, RAM considers the impact limited given the auto financing franchise’s relatively small scale and weak risk-adjusted returns.
The divestment forms part of a broader strategic repositioning following a prolonged period of weak profitability at the Thai banking operation.
CIMB Thai intends to place greater emphasis on wholesale banking and wealth management, where RAM said the bank could pursue higher risk-adjusted returns while leveraging CIMB Group Berhad’s broader ASEAN network.
Capital optimisation is another component of the strategy.
Management is targeting a common equity tier-1 (CET1) capital ratio of 14% by 2027, compared with 15.4% at end-June 2026.
While this would reduce CIMB Thai’s capital headroom, RAM said the prospective improvement in profitability and asset quality currently outweighs the impact of the lower capital buffer from a credit perspective.
CIMB Thai’s ratings continue to benefit from an uplift based on RAM’s assessment of a “high” likelihood of extraordinary support from its immediate parent, CIMB Bank Berhad, which carries RAM ratings of AAA/Stable/P1.
The rating agency pointed to CIMB Thai’s role in advancing CIMB Group’s ASEAN strategy, shared branding and the significant oversight and influence exercised by its Malaysian parent.
These strengths are balanced against CIMB Thai’s relatively modest contribution to group profits.
RAM noted that Thai foreign ownership conditions no longer permit direct capital injections, although other forms of shareholder support remain available.
The positive outlook puts CIMB Thai in a stronger position for a potential rating upgrade, but RAM said execution of the bank’s transformation strategy will be crucial.
The agency will monitor CIMB Thai’s ability to expand recurring fee income, maintain cost discipline and preserve sound underwriting standards as it reshapes its business model.
Successful execution that produces a sustained improvement in profitability in line with management’s targeted trajectory would support an upgrade, RAM said.
The planned auto finance exit is therefore a key turning point for CIMB Thai: while the portfolio accounts for only a relatively small portion of its loan book, removing a business responsible for the majority of recent loan-loss provisions could materially strengthen the bank’s earnings and asset-quality profile.
