CIMB Group (CIMB) reported an improved 3QFY24 net profit of RM2.03bn (+9.9% YoY, +3.5% QoQ), with non-interest income (NoII) driving growth amid a slight increase in provisions (conservatively undertaken for Malaysia and Thailand). Margins improved further due to optimization of its deposit base, while its loans book also saw better overall health. Cumulative 9MFY24 net profit of RM5.79bn (+9.9% YoY) is within our and consensus expectations at 76% and 74% of full-year estimates respectively. We remain optimistic over the Group's medium to long-term prospects even as it gets ready to roll out a new strategic plan by 1QFY25, with notable strides already made owing to its recent transformation initiatives. Our Trading Buy call is retained in anticipation of potential uplifts from its new strategic plan, with RM8.64 target price and earnings estimates also left unchanged.

• Operating income for 9MFY24 is higher by +8.5% YoY to RM16.97bn, sustained by steady net-interest income (+6.0% YoY to RM11.58bn) and NoII (+14.4% YoY to RM5.39bn) contributions. NoII growth was driven by fee-related (+11.3% YoY to RM2.09bn) and trading/FX-related (+22.4% YoY to RM2.93bn) meanwhile. By segment, wholesale banking (+12.1% YoY to RM4.86bn) led growth, followed by consumer banking (+7.4% YoY to RM7.02bn) and commercial banking (+3.7% YoY to RM3.12bn). By country, Malaysia (+12.5% YoY) and Singapore (+28.0% YoY) led growth, the latter largely due to robust capital markets.
• Net interest margin (NIM), on a Group basis, improved 1bps QoQ to 2.22% (2QFY24: 2.22%), though the more notable improvement is observed in its banking book NIM to 2.75% due to active asset-liability management, particularly in Malaysia. Given evolving developments externally and typical year-end competition, management sees some downward normalization in 4QFY24.
• Loans growth was relatively subdued this current quarter (+1.2% YoY, -1.8% QoQ) as management takes a more conservative stance while monitoring increasingly uncertain external conditions. By economic purpose, there appears to be obvious aversions toward construction- and securities-based exposures (Table 1). Current growth is still underpinned by consumer banking (+3.3% YoY to RM232.0bn) and commercial banking (+4.9% YoY to RM73.1bn) meanwhile. Overall loans growth guidance for 2024 is between 4% and 5%.
• Asset quality. Total provisions for 9MFY24 fell 3.9% YoY to RM1.15bn despite conservative provisioning undertaken in Malaysia and Indonesia, as higher recoveries and write-backs in Singapore aided in the improvement. Loan loss charge fell 2bps QoQ to 18bps due to lower provisions in Malaysia. Management is maintaining FY24 guidance at between 25bps and 30bps (9MFY24: 25bps). Gross impaired loans ratio is lower at 2.3% (2QFY24: 2.5%) while allowance coverage is also better at 102.6% (2QFY24: 101.2%).

Source: PublicInvest Research - 29 Nov 2024