- We maintain our HOLD rating on CIMB Group Holdings Bhd (CIMB) with an unchanged fair value of RM7.30/share for FY14F. This is based on an FY14F ROE of 12.7% and an unchanged fair P/BV of 1.7x.

- CIMB’s 1QFY14, if annualised, was 2.7% below our forecast and 10.7% below consensus estimates of RM4,776mil for FY14F. The 1Q made up 24.3% of ours and 22.3% of consensus forecasts for FY14F.

- The 1Q was largely affected by a soft start for the treasury and market division, while the investment bank was challenged by weak equity markets and an enlarged cost base. Otherwise, the corporate banking division was supported by regional banking, while the consumer division did well.

- Looking ahead, CIMB alluded that there may be an early stage of macro improvements in Indonesia, although the lag effect from the challenging environment earlier is now being played out in Indonesia. This is also being seen in its credit costs, as there may be further slight weakening due to the earlier volatile swings in Rupiah and interest rates in Indonesia. CIMB Thai is operating in a protracted political situation, and the macro environment remains difficult to predict at this point.

- It expects Malaysia and Singapore to remain strong. It does not foresee any major impact on credit costs in Malaysia even if there is a possible rate hike of circa 25bps, with possible slight upticks in impaired loans. But it generally foresees Malaysian consumer borrowers to be resilient.

- In terms of M&A, the company hinted that it may be keen to acquire a mid-sized bank in the Philippines, given that there may be new regulations to allow up to 100% foreign ownership.

- Maintain HOLD.

Source: AmeSecurities