CIMB Singapore to cut costs further

CIMB Group Holdings in Malaysia is looking to optimise costs this year by reducing office space and introducing flexible work arrangements for its employees in its Singapore operations. This reduction in office space will see its employees working from home, suggest sources, with a 'hot desk" arrangement for as many as four days a week. Hot-desking is an office organisation system which allows multiple workers using a single physical workstation. CIMB Singapore will not be reducing its headcount and nor will employees see their remuneration packages compromised, stating that the plan is just to reduce operational costs.

(March 8): Fresh from reducing its wage bill across the Asian region in 2015, CIMB Group Holdings Bhd — Malaysia’s second-largest bank by assets — is looking to continue optimising costs this year by reducing office floor space and introduce flexible work arrangements (FWAs) for employees in its Singapore operations.

According to sources, CIMB Singapore is planning to give up one storey of its current office space in Singapore Land Tower in Raffles Place, where it currently occupies 13,640 sf over 14 floors. It is understood that a consultant has been appointed by the bank to work on that.

In the financial year ended Dec 31, 2015 (FY15), CIMB spent RM559.5 million ($189.3 million) on rentals, up 18.5% year-on-year (y-o-y) from RM472.3 million. It is unclear how much rental savings can be made by the move, but channel checks revealed that office space in the Raffles Place area fetches between $10 psf and $12 psf.

The reduction in office space will see its employees working from home. Sources said with a smaller office, support and back-end staff with non-client facing roles will be expected to work off-site, with a “hot desk” arrangement for as many as four days a week.

Hot-desking is an office organisation system, which involves multiple workers using a single physical workstation. However, CIMB Singapore will neither be reducing headcount nor will employees see their remuneration packages compromised.

When contacted by The Edge Financial Daily, CIMB Singapore confirmed that steps are being taken to reduce operational costs.

“With the increasing cost tagged to space area required to accommodate the larger staff force we have, space utilisation and maximisation is an area that we review regularly.

“In the latest review undertaken by CIMB Securities, we have identified pockets of space, which our securities staff can occupy and plans are under way to move the staff to these spaces. With this move, we are able to vacate an entire floor in Singapore Land Tower that we are currently occupying,” CIMB Singapore said in an email reply.

“The bank has also, in the fourth quarter of 2015, begun to pilot the work-from-home and flexi-work arrangements to not only help us better manage rental costs, but also to support the Singapore government’s drive towards work-life harmony.

“We are presently undergoing a pilot test phase, where we have allowed some staff to try out the work-from-home and flexi-work arrangements to better understand the operational, privacy and security considerations needed,” it added.

According to CIMB Singapore, this is not the first time such measures are taken to trim the fat of its operations. In 2001, the company relocated some of its non-client-facing operations to its office in Mountbatten. Rentals in Mountbatten, it added, were “much lower” compared with the city centre.

FWAs are not uncommon in Singapore and are part of the government’s agenda. To encourage employers to offer FWAs, the government offers developmental grants to employers who take steps towards implementing FWAs.

Employers, office-building owners and management corporations can get grants that help defray developmental costs for training, consultancy and infrastructure if it pilots or enhances FWAs. FWA incentives of up to $120,000, paid in tranches over three years, are also available for companies which have at least a 30% utilisation rate for FWAs.

CIMB’s decision to reduce costs at this point reflects the challenging environment banks have been operating in.

Early last year, CIMB cut dozens of jobs, mostly in its equities trading businesses in Hong Kong, Singapore and Australia. It also sought to reduce staff costs and headcount by carrying out a RM443.3 million mutual separation scheme for its Malaysian and Indonesian operations.

Filings with Bursa Malaysia said the bank trimmed its workforce in its Malaysian and Indonesian banking arm (PT Bank CIMB Niaga TBK) by 11.1%, possibly saving CIMB as much as RM291.6 million a year, translating into a 18.2-month payback.

For FY15, CIMB’s earnings fell for the second year running. It registered a net profit of RM2.85 billion, an 8% decline y-o-y, despite an 8.8% improvement in turnover to RM15.4 billion.

Analysts said the results were “within expectations, but it’s the lowest post-tax profit the bank has seen since the last financial crisis in 2009”. At the time, its net profit stood at RM2.81 billion.

For FY16, CIMB has guided that it is aiming to achieve a return on equity of around 10%, total loan growth of 10%, credit charge ratio of 60 basis points (bps) to 70bps, and a credit information report at below 53%.