• 9M24 core PATAMI was ahead of expectations at 78% of our full-year estimate

• CET1 target raised to >14.5%, with no further special dividend expected

• Adjusted 2024–26E earnings by +2%/+1%/-3%. Maintain BUY and TP of RM9.30

Result above expectations

3Q24 core PATAMI of RM2bn (+4% QoQ, +10% YoY) brings 9M24 core PATAMI to RM5.9bn (+13% YoY), representing 78% of our and 77% of consensus full-year estimates. We deemed results above expectation on better-than-expected non-interest income (+16%). Reported 9M24 ROE stands at 11.7% (+1ppts), while CET1 remains strong at 15%. The revised CET1 target of >14.5% surprised us, indicating that additional special dividends are unlikely in the near term. CIMB’s new 5-year plan will be centered around building a robust deposit franchise and is expected to be announced by 1Q25. There are no changes to the 2024 targets, with CIMB on track to meet its 11–11.5% ROE target. However, loan growth and credit cost guidance have been revised downward to 4–5% (from 5–7%) and 25–30bps (from 30–40bps), respectively.

Robust non-interest income in 3Q24

3Q24 PIOP of RM3bn (+1% QoQ) was mainly driven by a strong non-interest income (+7% QoQ), underpinned by strong capital markets and client franchise income. Meanwhile, net interest income grew 1% QoQ, supported by 1bps QoQ expansion of group NIM. We expect NIM pressure in 4Q24 due to increased liquidity competition. Provisions increased by 15% QoQ on conservative provisioning and lower writebacks in the non-retail segment. This, coupled with lower taxation and MI, led to a 4% QoQ growth in core PATAMI. Asset quality continues to improve across all key markets, with GIL declining 20bps QoQ to 2.3bps.

Maintain BUY; unchanged GGM-derived RM9.30 TP

Post results, we revised our 2024-26E earnings by +2%/+1%/-4%, mainly to account for a lower loan growth assumption of 4% (from 6%). Despite this, our TP remains unchanged at RM9.30, based on a GGM assumption of a sustainable ROE of 11.2%, LTG 3.5%, and COE of 9.4%. Our target price implies a 1.3x P/B based on 11.2% ROE. We believe a premium is justified due to CIMB’s dividend outlook (with the potential for higher capital payout given its solid CET1 positioning) and disciplined strategy to drive ROE. Key risks to our BUY call include extended compression in NIM, an inflating cost base, rapidly deteriorating asset quality, and intense competition for low-cost deposits.

Source: Philip Capital Research - 29 Nov 2024