Overview of CIMB Group Holdings
CIMB Group Holdings, one of Malaysia’s largest financial institutions, provides a range of consumer and investment banking services. The company maintains a significant market presence across ASEAN countries such as Indonesia, Thailand, Malaysia, and Singapore. This comprehensive analysis dives deep into CIMB’s performance, financial metrics, and strategic focus areas as highlighted by Maybank Investment Bank Berhad.
4Q24 Performance: Softer Yet Steady
4Q24 is expected to be softer sequentially for CIMB Group Holdings. While loan growth picked up due to higher corporate disbursements, the group faced headwinds in net interest margins (NIMs) and non-interest income (NOII). The quarterly earnings are forecasted to decline by 8% quarter-over-quarter (QoQ) but show a 9% year-over-year (YoY) improvement. Despite these challenges, the group’s credit cost remains benign.
Key Financial Metrics and Projections
Maybank Investment Bank maintains a “BUY” recommendation for CIMB with an unchanged target price of MYR 9.20, representing a 16% potential upside from the current MYR 7.94 share price. CIMB is valued at a FY25E price-to-book ratio (PBV) of 1.3x, with an anticipated return on equity (ROE) of 11.2% and cost of equity (COE) at 9.5%.
Core net profit is projected to grow steadily into FY25 and FY26, reaching MYR 8.18 billion and MYR 8.65 billion, respectively. CIMB’s dividends per share (DPS) are expected to remain robust, with a forecasted yield of 5.9% for FY24, gradually normalizing to 5.7% by FY26.
Loan Growth Trends
Loan growth for FY24 is anticipated to achieve a 4% YoY increase, slightly below the earlier target of 5–7%. The 4Q24 highlights include robust corporate lending and stable mortgage pricing, which are expected to drive momentum into FY25. CIMB’s data center loan approvals, totaling MYR 1.4 billion, and a pipeline of MYR 3.5 billion provide further growth opportunities in 2025.
Regionally, Thailand’s lending environment remains subdued due to asset quality monitoring, while Indonesia saw short-term corporate loan disbursements rise opportunistically. Singapore operations continue to thrive, aided by competitive pricing and differentiated business strategies.
Net Interest Margins (NIMs) Analysis
4Q24 saw NIMs under pressure, particularly in Malaysia and Indonesia. Deposit rates in Malaysia began rising in late 2024, impacting margins. In contrast, Singapore’s margins held steady due to proactive liability repricing and strong liquidity positions. Although CIMB Niaga in Indonesia faced short-term challenges, recent rate cuts from Bank Indonesia are expected to positively impact NIMs over the long term.
Non-Interest Income (NOII) Performance
After a strong 14% YoY growth in 3Q24, NOII normalized in 4Q24 due to seasonal effects. Moving forward, CIMB aims to bolster its client franchise business, focusing on forex and structured product offerings to ensure sustainable growth.
Restructuring Plans for CIMB Thai
CIMB Thai posted a remarkable 78% YoY increase in net profit for FY24. However, challenges persist in declining margins and high credit costs. A restructuring of the consumer finance business is deemed necessary to elevate CIMB Thai’s ROE beyond the 5.8% recorded in FY24.
Expense Management
Operating expenses grew by 7.7% YoY in 9M24, driven by personnel costs and technology investments. While technology spending is expected to sustain momentum, personnel cost growth may moderate in FY25 due to prior workforce expansions and union-related increments in FY24.
Asset Quality and Credit Costs
CIMB has successfully de-risked its asset portfolio in key markets like Thailand, Indonesia, and Singapore. This strategic approach ensures stable asset quality, enabling the group to explore higher-risk segments such as personal financing in Indonesia and SME lending in Malaysia. Credit costs reached a historic low of 25 basis points in 3Q24, but normalization is expected moving forward.
Capital and Dividend Policies
Management is content with a Common Equity Tier 1 (CET1) ratio of 15% and a 55% dividend payout for FY25E. While higher payout ratios could emerge in the future, special dividends are unlikely at this stage.
Strategic Outlook for FY25
Looking ahead, CIMB aims to concentrate on high-return markets like Indonesia and Singapore, alongside commercial banking. The turnaround of CIMB Thai remains a priority. CEO Novan Amirudin is set to unveil a new strategic business plan on March 5, 2025, which could outline further growth initiatives.
Risks and Challenges
As Malaysia’s second-largest financial institution, CIMB’s performance is inevitably tied to the domestic economy. Regional exposures in Indonesia, Thailand, and Singapore also pose risks related to interest rate movements and currency fluctuations, particularly the Indonesian Rupiah (IDR).
Conclusion and Recommendation
Maybank Investment Bank Berhad remains optimistic about CIMB Group Holdings. The “BUY” recommendation, supported by a target price of MYR 9.20, reflects confidence in CIMB’s ability to navigate near-term challenges while capitalizing on growth opportunities in FY25 and beyond. Investors are advised to monitor upcoming developments, including the strategic business plan announcement in March 2025.
