CIMB Group Holdings Bhd’s (CIMB) 3Q23 earnings core net profit of RM1.85 billion were above expectations, up by 21% YoY and 4% QoQ respectively, according to Maybank Investment Bank (Maybank IB).
The research house said it and we have raised FY23 to 24E earnings by 2 to 5%, its FY23E ROE of 10.2% is at the lower end of the CIMB management’s target of 10.2 to 11%.
It raises its TP to RM6.70, up by 20 sen, on an unchanged FY24E PBV of 1x, supported by a FY24E ROE of 10.2% but maintains its BUY call.
“We raise our FY23-25E earnings by 5%, 2%, 2% respectively, mainly to factor in lower credit cost. Correspondingly, we now expect a higher ROE of 10.2% for both FY23/24E respectively versus 9.8% and 10% before.
“Our ROE forecast is at the lower end of management’s target of 10.2 to 11% this year and below the target of 11.5 to 12.5% for FY24, for which management believes the lower end is more realistic.”
Maybank IB said CIMB’s core net profit for 3Q23 and 9M23 core net profit to RM5.26 billion, up 28% year-on-year (YoY) is above with its expectation at 83% and 80% of our full-year forecast and consensus respectively.
“The positive surprise came from much stronger-than-expected non-interest income (NOII) and lower-than-expected provisions in 3Q23.
“Targets largely maintained management’s targets for FY23E are largely maintained, but positively, credit cost guidance has been lowered to between 35 and 45 basis points (bps) from between 40 and 50 bps previously.
“Loan growth is tracking guidance of 6 to 7% while the group’s cost and income ratio of 46.3% is in line with management’s target of more than 46.5%,” it said.
A disappointment, however, is that NIM contraction of 26 bps in 9M23 is larger than management’s expectation of a 15 to 20 bps contraction, the research house said.
“Expectation is that NIM is likely to see a bit more of a QoQ contraction in 4Q23 due to the pick-up in domestic deposit competition.
“Positive, however, is that the 9M23 ROE of 10.7% is trending towards the higher end of management’s 10.2 to 11% target for the year,” it added.
As for the downside risks, Maybank IB said as the second largest domestic financial institution in Malaysia in terms of asset size, any economic slowdown in the country would have a knock-on effect on the group’s operating performance.
“Moreover, with regional exposures in key markets such as Indonesia, Thailand and Singapore, economic volatility in the region would have a bearing on overall operations.
“Further decreases in Indonesia’s interest rates could squeeze margins in the near term, while the weakening of rupiah could impact the translation of CIMB Niaga’s earnings.
