- We maintain our HOLD rating on CIMB Group Holdings Bhd (CIMB) with an unchanged fair value of RM7.80/share for FY14F. This is based on an FY14F ROE of 13.0% and an unchanged fair P/BV of 1.7x.

- CIMB’s foreign shareholding extended its downward trend for six consecutive months, with foreign shareholding declining to 35.0% as at end-November 2013 from 35.8% a month earlier, and from the year’s peak of 42.7% end-May 2013.

- This is the lowest level in more than four years since July 2009’s 34.9%.

- The net number of shares sold by foreign shareholders slowed down though to 61mil in November 2013, compared to 84mil in October 2013, based on our estimates (see Chart 1 in following page 2).

- This means that, for the year-to-date, there was a net selling of 337mil shares by foreign shareholders compared to FY12’s net foreign buying of 37mil.

- 2013 may register the highest foreign selling since 2008 (see Chart 3 in page 3).

- Going forward, the company expects treasury and markets division to recover in 4Q13. In addition, it also expects 4Q13 top line to be stronger, led by the investment banking division, Malaysian consumer division and the regional corporate banking pipeline.

- However, it expects CIMB Niaga’s contribution to remain muted. DCM pipeline is expected to be better but treasury and markets as a whole will still need to navigate relatively volatile markets.

- We continue to remain cautious as we expect higher credit costs ahead. We are maintaining our credit costs assumptions for CIMB Niaga of 150bps for FY14F and 120bps for FY15F. We are also maintaining our credit cost assumptions of 30bps for the Malaysia operations. Thus, for the group, we are maintaining our overall credit costs assumption at 57bps for FY14F.

Source: AmeSecurities