-  We maintain our HOLD rating on CIMB Group Holdings Bhd (CIMB), with an unchanged fair value of RM8.50/share. This is based on unchanged ROE of 14.4% for FY13F, leading to unchanged fair P/BV of 2.0x.

-  CIMB’s net earnings for 2QFY13 if annualised was 3.8% above our forecast, but 4.6% below consensus.

-  Annualised loans growth was stronger at 13.8% for 2QFY13, higher than 1QFY13’s annualised growth of 12.1% QoQ, while NIM was stable in 2Q with a 1bps QoQ increase.

-  Investment and trading income was at a net total of RM201.2mil in 2QFY13. Although this is lower than the RM379.7mil level in 1QFY13 (+23.3% QoQ), it is decent considering overall volatility in Malaysian Government Securities (MGS).

-  The marked-to-market (MTM) unrealised gain for its available-for-sale (AFS) securities is now lower at RM291.3mil in 2QFY13, from RM629.1mil in 1QFY13 (4QFY12: RM801.0mil).

-  In terms of performance by divisions, CIMB said that it was a generally tough operating condition for Treasury Markets and CIMB Niaga. On the whole, the Malaysian Consumer Bank and Regional Corporate Bank continued to show good traction from CIMB 2.0.

-  CIMB Singapore and Thailand grew strongly while the investment banking division declined slightly YoY with the absence of mega IPOs.

-  Looking ahead, CIMB hinted at overall weakening external macro economic environment and markets. It expects the Regional Corporate Banking, Malaysia Consumer Banking, CIMB Singapore and Thailand to sustain momentum and to continue doing well in 2H.

-  It hinted that the Treasury Markets will have to navigate market turbulence but to also capitalise on new opportunities. CIMB Niaga is expected to be watchful on asset quality given depreciation of the Rupiah, rate increases and generally slower Indonesian economic growth. Overall investment banking pipeline remains strong but it is susceptible to market conditions.

-  CIMB is maintaining its ROE target of 16% for FY13 although it did hint that it is a challenge to achieve it currently. We reckon the share price may rerate on (a) stabilisation of Indonesian macro situation; (b) confirmation of minimal marked-to-market losses for its securities portfolio; (c) indication of better capital markets which would be positive for its investment banking pipeline.

Source: AmeSecurities