- We maintain our HOLD rating on CIMB Group Holdings (CIMB) with an unchanged fair value of RM6.30/share. This is based on an unchanged FY15F ROE of 11.2% and an unchanged fair P/BV of 1.3x.

- At our company visit, CIMB alluded that there it does not expect further substantial spike in CIMB’s impaired loans from now on, as the bulk of the asset quality issues are still with the same coal and coal-related loans.

- In terms of loan loss provisioning, it expects CIMB Niaga’s loan loss provisioning expense to remain elevated but we gather that it is unlikely to be as high as those seen in 1QFY15 and 4QFY14. These are likely to be related to the same corporate impaired loans.

- Overall credit costs target is maintained at 40bps to 50bps, but CIMB alluded that credit costs may be closer to the top end of the target for this year.

- Total targeted costs reduction is still RM400mil to RM600mil, with about 40% considered to be completed year-to-date. We believe that the bulk of these restructuring costs are likely to be reflected in the 1QFY15 results.

- The company expects that a large portion of this RM400mil to RM600mil of costs reduction to be completed this year.

- All in, we believe that the next few quarters’ net earnings are unlikely to be impacted as much in terms of loan loss provisioning from CIMB Niaga, vs. what was seen in 4QFY14.

- Nevertheless, based on latest indications, we think there is still limited room for us to upgrade our forecasts. We maintain our HOLD rating.

Source: AmeSecurities Research - 29 Apr 2015