- At our recent company visit, CIMB Group Holdings (CIMB) alluded to the corporate and investment banking business (CIB) still showing fairly strong and decent growth despite recent redemptions. The investment banking pipeline looks decent for FY13, and is expected to be propped up by numerous smaller sized deals, which are expected to make up for the lack of mega-IPO deals seen in 2012. As for the treasury and markets division, the company has seen good flows in recent months.

- For the consumer segment, the company is focussing on higher-yielding Amanah Saham Bumiputra (ASB) unit trust financing, credit cards, and personal loan business. We understand that the ASB business growth is estimated at three times the industry average recently. This is due to CIMB’s new cross-selling efforts to its existing mass market segment customer base.

- Net interest margin (NIM) is likely to experience some compression QoQ, partly due to NIM decline for CIMB Niaga and partly due to overall competitive pressures. The consumer segment’s NIM for Malaysia is relatively stable due to a new focus on higheryielding assets. The company had earlier guided for a NIM compression of 5-10bps YoY for FY13F but now expects the overall compression to likely range at 10-15bps YoY.

- Asset quality is likely to be stable, with the recent increase at CIMB Niaga attributed to coal-related vendors. Notwithstanding this, the company is maintaining an overall credit cost target for the group at 40bps for FY13F. We believe there may be a spill-over from ongoing write-backs which had contributed to the low credit cost in FY12F. Thus, we believe credit cost is likely to remain low in 1QFY13, with a gradual movement towards the 30bps to 40bps level in the remaining quarters of FY13F.

- The RBS acquisition is now fully completed. We expect some uptick in the cost-toincome ratio, given that Korea was completed in February while India and Taiwan was added recently. The good news is the company alluded to Australia seeing volumes catching up to the previous levels. Overall, we are reassured by the stable CIB and treasury and markets division, with the Australian business providing evidence of new market potential from RBS. Thus, the outlook for non-interest income remains healthy. Maintain BUY.

Source: AmeSecurities