JAKARTA: CIMB Group Holdings Bhd is making a push into digital banking in Southeast Asia, starting with Vietnam, as Malaysia’s second-biggest bank by assets seeks to expand in the region without swelling costs.

The Kuala Lumpur-based lender will launch its first fully digital bank in Vietnam in January, followed by the Philippines, where it has received a license, Chief Executive Officer Tengku Zafrul Abdul Aziz said in an interview in Jakarta on Wednesday. Both markets are new to CIMB.

Digital retail banking will allow lenders to reduce their cost-to-income ratios to 20 to 30 percent from around 50 percent once such operations gain size and momentum in five to 10 years, Tengku Zafrul said. 

Cost savings is one reason why Bloomberg Intelligence analyst Diksha Gera sees CIMB continuing to improve profitability over the next two years.

“That’s where it’s important that we have partnerships in those markets -- to achieve scale, to accelerate the scale that we plan to have,” Tengku Zafrul said. 

He plans to work with retailers and telecommunication companies to “build a strong ecosystem.” The bank may also consider starting a digital bank in Thailand in the next two to three years, he said.

CIMB has rallied 32 percent this year, beating the local benchmark, as shrinking loan-loss provisions and higher interest income boosted profit. While the bank reduced headcount in selected areas, it’s still expanding in Southeast Asia and building up its wealth management and investment banking businesses.

The bank’s ratio of costs to income improved to 52.1 percent in the nine months ended September from 54.6 percent a year earlier, results showed last month. - Bloomberg