Investment Highlights

• We maintain BUY on CIMB Group Holdings (CIMB) with a higher fair value (FV) of RM8.70/share (previously RM8.00/share) pegging the stock to a raised FY25F P/BV o 1.2x, supported by ROE of 11.7% with a premium of 3% based on our 4-star ESG rating.

• We fine-tuned FY24F/25F/26F earnings by +3.2%/-0.6%/+0.6% to factor in higher estimates for non-interest income (NOII).

• 6M24 net profit of RM3.9bil was within expectations, making up 51.6% of our full-year estimate and 51.2% of consensus’.

• 2Q24 earnings grew modestly by 1.3% QoQ to RM1.96bil driven by higher net interest income (NII) and lowe provisions, partially offset by weaker non-interest incom (NOII) largely from a decline in trading, fx income, gains from sales of NPL coupled with higher OPEX.

• 6M24 earnings grew 14% YoY, underpinned by stronger NI NOII and lower allowances for loan impairment with an improved credit cost of 27bps, slightly lower than management’s guidance of 30-40bps for FY24.

• Gross loan growth eased to 4.2% YoY from 7% YoY in 2Q24 as the group continued to focus on funding-led strategy to be selective on loan deals with the right pricing to protect NIMs rather than growing by volume and market share. Noticeably wholesale banking loan growth moderated. Also, YoY growth of consumer and commercial loans tapered down. Domestic loans grew 4.8% YoY vs. the industry’s 6.4%. In FY24F, CIMB continues to target a loan growth of 5%-7%, suggesting a pick up in pace on loan expansion in 2H24.

• In 2Q24, NIM improved by 4bps QoQ to 2.22%, driven largely by lower cost of funds in Malaysia and higher loan yield in Indonesia as well as improved funding cost in Thailand which more than offset a weaker interest margin in Singapore. 6M24 NIM contracted by 5bps to 2.2% with higher margins in Malaysia and Singapore being more than offset by weake interest margins in Thailand and Indonesia.

• The group’s CASA growth moderated to 9.2% YoY in 2Q24 contributed by a drop in wholesale banking deposits Nevertheless, CASA ratio remained stable at 40.9%. QoQ CASA ratio rose in Thailand and Singapore. In contrast, the ratio was lower for Malaysia and Indonesia.

• 6M24 NOII climbed 13.2% YoY to RM3.6bil due to stronge trading, fx and fee income.

• 6M24 CI ratio improved to 45.6% vs. 46.5% in 6M23, supported by positive JAW of 0.8%.

• CIMB is on track to meet its FY24F targets. The group will be focussing on sustaining NIM, increasing NOII, growing loans in preferred segments, optimising cost and managing asse quality.

• GIL ratio improved marginally to 2.50% in 2Q24 vs. 2.55% in 1Q24.

• The group declared a higher interim dividend of 20 sen/share together with a special dividend of 7 sen/share. Tota dividends of 27 sen/share (payout: 74%) in 6M24 were highe than 17.5 sen/share (payout 55%) in 6M23.

Source: AmInvest Research - 2 Sep 2024