KEY INVESTMENT HIGHLIGHTS

• Strong set of results from CIMB Thai for 9MFY24
• Asset quality improved in Thailand
• NOII and service fees offset NII decline
• Forecasts unchanged
• Maintain BUY | Unchanged TP of RM9.11 | based on an unchanged FY25F P/BV of 1.29x

Results in a nutshell:

▲ Strong growth in CIMB Thai 9MFY24's net profit (NP). CIMB Thai recorded 9MFY24 NP growth of +8.9%yoy to THB1.89b. The main drivers were +4.5%yoy growth in operating income and -5.7% decrease in expected credit losses to THB1.77b, moderated by a +6.5%yoy increase in OPEX.

▼ NII declined... NII declined marginally by -1.5%yoy to THB7.25b.

This was due to NIM compression of -30bps to 2.3%, from higher cost of funds.

▲ ...but higher fees and NOII made up for it. Net fee and service income went up +6.8%yoy to THB998.4m largely due to higher fee income from goods and services payment and fund transfer and collection. Meanwhile NOII rose by +24.9%yoy to THB2.54b, driven by higher net gains on financial instruments measured at fair value through profit or loss. This was partially offset by lower gains from the sale of non-performing loans and gains on investment. As a result, operating income grew by +4.5%yoy to THB10.79b.

▸ OPEX increased but personnel cost came lower. OPEX increased by +6.5%yoy to THB6.66b due to higher impairment loss on properties for sale. However, lower personnel expenses helped to mitigate some of this impact. As such CIR was slightly higher at 61.7% in 9MFY24 compared to 60.6% in 9MFY23.

▲ Gross loans rose. As at end 9MFY24, total gross loans grew +2.7%ytd, stood at THB251.5b. Meanwhile, deposits stood at THB283.7b, a decrease of -8.6%ytd.

▲ Asset quality improved. Gross NPL ratio improved to 2.5% as compared to 3.3% as of 31 December 2023, where gross NPL stood at THB6.4b. The lower NPL ratio was mainly attributed to the sale of several NPLs in FY24, improvement in risk and asset quality management, as well as loan collection processes.

▲ CIMB Thai's robust results will contribute positively to the group. We were pleasantly surprised by the 3QFY24 robust results by CIMB Thai as we previously have yet to see a meaningful turnaround. We expect that this set of results will contribute positively to the group's 9MFY24 performance. For context, CIMB Thai contributes 4% to the group's PBT in 1HFY24.

Forecasts unchanged. We make no change to our forecasts.

Key downside risks. (1) Steep NIM compression, (2) Sharp cost inflation, (3) Weak NOII result.

Maintain BUY call: Unchanged GGM-TP of RM 9.11. The TP is based on an unchanged FY25F P/BV of 1.29x.

(GGM assumptions: FY25F ROE of 11.0%, LTG of 3.5% & COE of 9.3%)

Source: MIDF Research - 22 Oct 2024