- 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.

- At our recent company visit, CIMB alluded that its corporate loans segment is likely to remain subdued, mainly due to ongoing maturities of government-related loans.

- The consumer loans segment is likely to hold up – backed by its ASB unit trust financing, mortgage, and auto segments. These are likely to see ongoing growth at the high single-digit growth levels.

- It expects to maintain its stance of shedding the more expensive fixed deposit segment and focus on CASA to drive deposit growth. It remains comfortable with the current LDR for Malaysia ranging around 80% with further room to reach 90%.

- With the recent rate hike, it still expects overall group NIM to compress by 5bps to 10bps YoY. NIM is expected to be more affected by CIMB Niaga’s NIM, which is alluded to possibly decline to 5% from the current 5.3% level. Otherwise, NIMs around the region are holding up well –particular those in CIMB Thai and Singapore. As for Malaysia, there is likely to be an increase of a few bps given the recent rate hike.

- Its investment banking pipeline is likely to remain relatively soft. While the mandates look healthy, there has been a slowdown in execution and conversion of these pipelines. There are also no significant IPOs for its ECM segment. There has been a slight increase in activities in the DCM market after the rate hike, while it was comparatively rather quiet prior to that.

- Its treasury and markets division’s volume growth has been healthy but it was offset by thinner spreads given the low volatility in the rates market. Thus, we expect its treasury and markets division’s performance to be flattish.

- We expect CIMB’s share price to be mainly driven by its proposed mega merger with RHB Cap and MBSB. Maintain HOLD on CIMB.

Source: AmeSecurities