INVESTMENT HIGHLIGHTS

• Expect FY19 income to be better

• Cost discipline to be maintained but investment needed

• No undue concern in asset quality

• Strategy remain in place for CIMB Thai

• No change to our forecast

• Maintain BUY with unchanged TP of RM7.70 pegging the stock to 1.3x FY19 Price-to-Book multiple

Meeting with management. We met with the Group’s CFO yesterday. Below are some of the key take away from our meeting:

• No change to management’s expectation of a weakness in FY18 income due to the NIM compression in Indonesia and volatile market condition in Malaysia.

• Income should improve in FY19.

• Group’s loans growth to be stable with contribution from all markets.

• Ramp-up in cost in Thailand was planned.

• Cost discipline will be maintained even as investment for next growth phase is to be made.

• We eagerly anticipate for the Group’s announcement on its new 5-year plan for the next phase of growth.

Not much change for 4QFY18. Without divulging in details, we understand that the income weakness we have observed up to 9MFY18 will persist in 4QFY18. These are mainly coming from weak NII and NOII in Indonesia and Malaysia respectively. Recall, 9MFY18 NII and NOII declined -3.7%yoy and -10.0%yoy respectively. While these weaknesses will be moderated by contained OPEX and lower provisions, we understand that it will not fully offset the income gap.

Income should improve in FY19. Nevertheless, we expect that income in FY19 will improve premise on: i) Less pressure in NIM in Indonesia due to repricing of assets following from the policy rate hike in CY18. ii) NIM stability in Malaysia as deposits competition remains rational. iii) Loans growth expected to remain stable.

Source: MIDF Research - 24 Jan 2019