KUALA LUMPUR (July 30): CIMB Group Holdings Bhd (KL:CIMB), Malaysia's second-largest bank by assets, will likely see softer non-interest income (NII) when it reports its results for the second-quarter ended June 30, 2024 (2QFY2024), according to analysts.

Hong Leong Investment Bank (HLIB) said in a note that softer trading and forex performance have led to a moderation in NII — income derived other than interest income on loans, CIMB told analysts during a pre-close period conference call.

However, this was mitigated by higher fees from the wealth management and wholesale banking segments, said the research house.

Meanwhile, HLIB said net interest margin is expected to widen marginally quarter-on-quarter, due to lower funding costs and stable lending yields.

"This is thanks to a benign deposit contest and CIMB’s move to optimise its local board FD rate," it said.

Additionally, management's deposit-led strategy helped grow the loan book carefully without affecting margins, the research house noted.

CIMB has also avoided some low-margin large corporate loans and significant refinancing, but its lending to small and medium enterprises (SMEs) remains strong and consumer lending is gaining traction, HLIB said.

Meanwhile, RHB Investment Bank anticipates CIMB's asset quality to be stable with no major concerns as delinquency trends for retail in Malaysia and Indonesia are stable or improving, and earlier pressures on local SMEs have eased.

"In Thailand, delinquencies in the consumer finance sector remain high but are improving," the research house noted, adding that CIMB maintains a credit cost guidance of 30-40 basis points to ensure adequate coverage.

Shares of CIMB have gained over 28% since the beginning of the year. At the time of writing, CIMB shares traded four sen or 0.55% higher at RM7.28, valuing the bank at RM77.46 billion.

Out of 19 analysts covering CIMB, 16 of them have "buy" calls for the stock. The consensus 12-month target price is RM7.64, according to Bloomberg.