CIMB Group Holdings Bhd told analysts at a pre-close period conference call that competition for deposits has eased, helping to lower cost of funds and that would boost net interest margin on a quarter-on-quarter basis.

KUALA LUMPUR (May 7): CIMB Group Holdings Bhd, Malaysia’s second-largest bank by assets, will likely see improvements in net interest margin and non-interest income (NII) when it reports its first-quarter results (1QFY2024) on May 31, analysts said.

Competition for deposits has eased, helping to lower cost of funds, CIMB told analysts at a pre-close period conference call. That would boost net interest margin (NIM) — a measure of profitability from lending — on a quarter-on-quarter basis, according to analysts who attended the briefing.

“NIMs are expected to have seen some sequential improvement” in 1QFY2024, with expansion in Malaysia offsetting compression in Singapore and Thailand, Maybank Investment Bank said. Deposit cost management strategies implemented in 2023 also helped, the house noted.

Shares of CIMB have gained nearly 18% so far this year backed by strong earnings and investors optimism for a rate cut by the US Federal Reserve that would spur inflows into emerging market stocks. Most analysts expect further gains.

A majority of 15 of 19 analysts covering CIMB have a "buy" call for the stock. The consensus 12-month target price is RM7.27, a further 7% gain from its last price of RM6.80, according to Bloomberg.

Further, Maybank IB expects strong NII for CIMB, driven by trading and forex income, along with ongoing non-performing loan sales in Indonesia.

Hong Leong Investment Bank (HLIB) also anticipates CIMB to record robust revenue performance in 1QFY2024, with a slight sequential expansion in NIM and strong NII supported by trading and forex activities.

"Moreover, fee income continues to chug along, especially from the consumer segment across all operating countries – through wealth management and bancassurance products," HLIB noted.

For Kenanga Investment Bank, CIMB's focus on pursuing higher-yield accounts and maintaining wholesale pricing suggest potential upside to its 5-7% loan target for FY2024 if favourable terms are secured.

CIMB believes that loan growth at its Malaysian segment could improve by 5%, which Kenanga said indicates that its other markets, such as Indonesia and Thailand, could carry a heavier weight.

“This however, does not wholly include the possibility of lumpy infrastructure projects that are anticipated in 2HFY2024," Kenanga added.