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

- CIMB has announced that Tan Sri Md Nor Yusof, chairman of CIMB Group, will retire from the board of directors and join the group's International Advisory Panel (IAP).

- Dato’ Sri Nazir Razak will take over as chairman of CIMB Group and relinquish his position as group CEO.

- The group said it is also taking this opportunity to reconfigure its leadership structure.

- In addition to being chairman of CIMB Group, Nazir will also chair an executive committee of the board (to be established), that will focus on key strategic matters and enhance the board’s oversight functions.

- A new group CEO will be announced once regulatory approvals have been obtained.

- Nazir will also continue to serve as president commissioner of PT Bank CIMB Niaga (CIMB Niaga) and deputy chairman of CIMB Bank. He will be nominated chairman of CIMB Investment Bank with effect from 1 Sept 2014.

- The company said that the changes to the leadership structure will institutionalise and strengthen the management of the group.

- We expect the changes at the top to have taken the market by surprise.

- That said, we believe that it is positive that there is some continuity at the top management level, given that the outgoing CEO will be staying as chairman of the group, CIMB Niaga, and CIMB Investment Bank.

- The company also alluded to no further changes to the present top management structure – e.g. the current deputy CEO – which is positive.

- The group alluded to the new CEO as likely to be a candidate who will work well with the existing management. There is no submission of candidates’ names for the CEO post yet.

- Maintain HOLD.

Source: AmeSecurities