Malaysia’s CIMB May Take $67M Credit Hit Due to Recent Payments Glitch

Malaysia’s CIMB has reported a credit loss of around $67 million because of a processing error that led to some clients receiving duplicate credits to their accounts.

CIMB‘s management discovered the glitch, which was related to a third-party financial remittance service, in January 2022.

The banking institution stated that it is now taking appropriate measures to recover the overpaid funds from client accounts.

CIMB stated:

“In view of the on-going assessment and recovery measures, the group has prudently provided for the majority of the exposure with an ECL of RM280.9 million in FY21, Depending on the group’s recovery engagement and outcome with customers, an additional and lower final provision amount may be taken in the first quarter of 2022.”

CIMB Group Holdings Bhd.’s shares dropped by around 6%, which is close to the largest intraday loss since March 2020, after the Malaysian banking platform reported a credit loss of 280.9 million ringgit (appr. $67 million) last year because of a system error that saw excess money deposited in certain user accounts. The stock fell to about 5.37 ringgit per share at the midday break (amid volume that was around 8x the 20-day average, according to  data from Bloomberg).

Malaysia’s second-largest banking institution, which has sovereign wealth fund Khazanah Nasional Bhd. as its biggest shareholder, actually identified the issues this year that related to a 3rd-party remittance provider, Group Chief Executive Abdul Rahman Ahmad confirmed on Monday (as reported by Bloomberg).

The Group confirmed that it is taking the necessary steps to recover the duplicate payments from the impacted clients and an “additional and lower final provision amount may be taken in the first quarter of 2022” depending on the overall recovery, Abdul Rahman noted while sharing the bank’s  Q4 full year earnings report.

This recent decline in share prices followed after CIMB noted that it had a total income of 4.3 billion ringgit (appr. $1 billion) last year, its strongest yearly figure since 2019.

Malaysia’s reserve bank had also requested the firm to offer “reasonable options” for clients to return the excess funds, Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus noted in statements shared with reporters during a recent online briefing on Malaysia’s Q4 gross domestic product results on February 11, 2022.

The reserve bank would be taking necessary supervisory and enforcement actions against CIMB if its investigation uncovers any violation of legal or regulatory guidelines, Shamsiah added.

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