We expect its upcoming FY19 results to be within expectations. Net interest margins (NIM) are expected on the lower end of its 5-10bps compression guidance with asset quality looking stable and credit charge slightly lower than its mid-point guidance of 40-50bps. Valuation is undemanding thus BUY with a TP of RM6.45 based on a FY20E target PBV of 1.06x (5-year mean). Dividend yield is at a reasonable 4.4%

We expect the Group to achieve its loans target of ~+6% for FY2019; primarily driven by consumer. For 4QCY19, we expect some slight pick-up in corporate loans as the Group saw some draw-downs in corporate activities at end of 2019. CIMB Niaga will see pick-up in both consumer and corporate in 4QCY10 but unlikely to see pick-up from the SMME side (Small Medium & Micro Finance). Overall outlook for the Group is generally expected to be moderate but we expect a pick-up in 2HCY20 especially from the corporate/commercial side.

Treasury activities are doing well with December being a good month but fee income activities were flat and likely to be fairly stable in 4QFY19. Management is fairly confident that fee-based activities will stay resilient in 2020, bolstered by MTM gains on an expected rate cut in 1QCY20.

We do not expect any significant changes in the Group’s guidance of 5-10bps NIM compression but it is likely to stay slightly above the lower end of this range. Domestic NIM are doing well and expecting to trickle up due to lingering effects of the re-pricing of deposits in 3QFY19. No significant ramp- up of deposits in 4QCY19 expected as liquidity in the banking system is still ample coupled with moderate outlook in loans growth.

Niaga saw slight NIM compression in 4QCY19 but we expect NIM to stay above the 5% level. While deposit competition is looking stable in both Malaysia and Indonesia, management guided for an increasing funding pressure for CIMB Thailand as it ramps up growth in 2020. Management guided for a 3-4bps compression in NIM for FY2020 (or RM200m loss) on the impending rate cut.

Source: Rakuten Research - 21 Jan 2020