• Keep BUY and MYR9.25 TP, 15% upside with 5% FY25F yield. 28 Jan's pre-closed period meeting held no major surprises. For CIMB's upcoming 4Q24 results (out 28 Feb), our and consensus 2024F PATMI imply 4Q24 net profit could ease by high single-digits QoQ while YoY PATMI could rise by mid-single digits. We expect a second interim DPS of 20 sen (4Q23: 18.5 sen interim) - a decent 2.5% yield, but CIMB has ruled out another special DPS for the quarter (7 sen special DPS announced in both Feb and Aug 2024).
• Expect a sequential softening in operating income due to NIM pressure... QoQ, group NIM is expected to be lower due to a combination of policy rate cuts (Indonesia and Thailand), tight liquidity conditions, and competition from government issuances (Indonesia) and seasonal deposit competition (Malaysia). Locally, management said new deposit campaign rates for both retail and wholesale moved up by 5-10bps during the quarter. Singapore NIM, however, was stable QoQ. The good news was that sequential NIM compression in 4Q24 was not as severe as the 10bps QoQ drop in 4Q23. Also, CIMB has seen some recovery in NIM in January due to timing of the repricing of deposits from policy rate cuts and deposit campaign rates returning to pre-4Q levels. CIMB also highlighted some lumpy wholesale loan drawdowns in Dec 2024 - positive for loan growth, but impacts NIM calculations.
• ...and moderation in non-II, as - not surprisingly - trading and FX income softened from elevated levels in 3Q24 (+12% QoQ, +27% YoY). Underlying fee income was resilient, with both wholesale and retail fees holding up, but management guided that net fee income would be impacted by card fee expenses for both Malaysia and Indonesia.
• No signs of asset quality stress. CIMB made minor provisions for its consumer book in Indonesia while, in Malaysia, some earlier uptick from the auto portfolio has started to stabilise. On the whole, group asset quality remains intact, and management has not seen any notable signs of stress. CIMB highlighted that its consumer portfolio in Thailand appears to be improving, giving management some optimism that the worst could be past.
• Other highlights. Data centre-related loans approved stood at MYR1.5bn, a small portion of which has been drawn down, while the pipeline has been stable. CIMB was comfortable that, despite the recent uncertainties surrounding the prospects for data centres, their borrowers are likely to proceed with their respective plans, which should be supportive of loan growth ahead. Lastly, the group's new strategic plan is set to be unveiled on 5 Mar. In our view, a higher ROE target could be a near-term re-rating catalyst and supportive of further multiples expansion.
• No changes to TP and earnings forecasts, pending the 4Q24 results. Our TP includes a 6% ESG premium.

Source: RHB Research - 28 Jan 2025