News

Tan Sri Md Nor Yusof, Chairman of the Group will retire from the Board on 1st Sep 2014 and the group is taking this opportunity to reconfigure leadership structure.

Dato’ Sri Nazir Razak will take over as Chairman and relinquish his position as Group CEO. He will also chair a new Executive Committee of the board to focus on key strategic matters and enhance oversight functions.

Nazir will also continue as President Commissioner of PT Bank CIMB Niaga and Deputy Chairman of CIMB Bank and be nominated Chairman of CIMB Investment Bank with effect from 1st Sep 2014.

New Group CEO announcement upon regulatory approval.

Khazanah also announced the appointment of Nazir to its board from 1st Sep 2014, consistent with previous protocol.

Briefing Highlights

Opportunity to have a new Chairman (although nonexecutive) which has deep knowledge of the industry and group and create more integrated working relationship between the new Chairman and new CEO as well as existing management team (which will not be changed).

Nazir’s role will be transformed from day-to-day operation to providing strategic overview and direction to the group. His involvement is not expected to be any lesser then as CEO. Moreover, as the new Chairman, he is still “leading” the group but in a different and more strategic role.

Although no longer drawing salary, Nazir’s interest is still very much align with the group given that his entire wealth is in the 52.2m shares of CIMB Group.

Aim to complete appointment of new CEO (one who could bring in new ideas and can work with all the stakeholders, Nazir and management team) by 1st Sep.

Comment

We take comfort from Nazir continued involvement in the group, especially that he will be “leading” the group from the strategic viewpoint and do not expect significant deviation in the group’s earnings trajectory.

Risks

Unexpected jump in impaired loans, lower than expected loan growth and impact on non-interest income if there is a slowdown in capital markets.

Forecasts

Unchanged.

Rating

HOLD

Positives - Proxy to economic growth and capital markets as well as growing regional universal bank platform and the new core banking system (1Platform).

Negatives – Impact on non-interest income if capital markets soften and impact on asset quality from higher Indonesia interest rate.

Valuation

Target price maintained at RM7.74 (Gordon Growth with ROE of 13.7% and WACC of 10.5%).

Source: Hong Leong Investment Bank Research - 4 Jul 2014