CIMB Group Holdings Berhad is seen to have a positive NIM expansion, Asset quality retained and Strong NOII performance
MIDF Research today (May 7) said have revised their forecasts for FY24/25/26F earnings by +0.5%/+2%/+1% respectively and maintained a BUY call on a revised TP of RM7.17 based on CIMB’s good dividend yields, and still some share upside potential.
“Dividend yields are strong, with the possibility of special dividend recurrence under positive factors such as Niaga and Singapore providing excellent regional exposure and Digital initiatives coming to fruition.”
MIDF cited that risks to their call includes Thailand is yet to stage a convincing turnaround, limited room for further ROE optimisation and NCC is nearing its steady state.
Group NIMs saw slight margin expansion:
Singapore FD repricing timing and loss of CASA to term deposits while Thailand COF increases, as well as less optimal asset mix. In Indonesia there were improvement in loan yields, while the COF remains unchanged.
CIMB saw driven COF improvements in Malaysia which should still see benefits realised in 2QFY24. This comes from deposit initiatives made in Apr-23. Beyond 2QFY24, however, there is little scope for improvement (expect only minor tweaks to deposit rates).
Rise in NOII saw a good quarter. This was driven by good fee income, NPL sales in IND, and non-fee income (FX and trading) via MY and SG. While CIMB guides for lumpy NPL sales in subsequent quarters, FY24 should be able to sustain FY23’s level.
Loan growth outlook is more mixed. CIMB retains its FY24 loan growth target of 5-7%, with MY’s targeted growth at 5%. On the possibility of potential upside surprises (given its peers have opted for much higher loan targets), the management was pessimistic, prioritising NIM over loan growth.
On a Group basis, CIMB is willing to drop further market share in corporate and business banking loan segments. However, it will be less willing to lower exposure to consumer and SME segments, as a loss in franchising and presence in those segments is harder to recover.
Mortgages will be under scrutiny, especially if the costs outweigh cross selling potential. The Group has already increased mortgage yields by +20bps over the last 12 months, losing 5-10% of acceptance level.
Still optimistic about CASA outlook. Malaysia, Indonesia and Thailand still sees good traction while Singapore is still losing out to term deposits. The focus of Malaysia is on business CASA: Via the CIMB @ work initiative (payroll options), local businesses with linkage to SG and regrowing government CASA (it has lost market share for a couple of years).
No major deteriorations on an asset quality front. There may be slight festive-season-related missed repayments in the Malaysia SME space, but management assures us that these are mostly movements into delinquencies rather than full blown stage 3 impairments.
On the current NCC guidance of 30-40bps, management believes this is close to the steady state and advises not to expect it to reduce further in the near term.
No major ROE plans soon. Management mentions that any plans to lift ROE further will need to involve Malaysia, as it is too large of an earnings contributor to ignore. While the official mid-term drivers (post-2025) are still being eked out, possible near-term drivers to MY include better-than-expected NIMs and cost control opportunities. Thailand also has some space for improvement, MIDF Research added.
