PETALING JAYA: Analysts are upbeat on CIMB Group Holdings Bhd in light of promising non-interest income (NOII) and net interest margin (NIM) stabilising.
TA Research stated that following its performance in the first quarter of financial year 2024 (1Q24), CIMB is on track to meet its five-year targets as it progresses with its Forward23+ ambitions.
In 1Q24, CIMB’s cost-to-income ratio (CIR) of 45.3% almost reached the aim of keeping CIR below 45%, while its return on equity (ROE) of 11.4% is approaching its Forward23+ range of 11.5% to 12.5%.
Its common equity tier 1 (CET 1) ratio is at 15%, above the target of 13.5%, and its cost of credit, at 35 basis points (bps), is also better than the projected 50 to 60 bps.
“As such, we believe there could be potential for distributing excess capital through another special dividend this financial year,” TA Research stated.
Going back to the NIM and NOII outlook, TA Research said CIMB is expected to continue driving net interest income (NII) through NIM management, enhancing NOII, strengthening the deposit and current account and savings account (CASA) franchise, maintaining asset quality and focusing on digital and operational resilience.
Meanwhile, MIDF Research stated that CIMB is cautiously optimistic about the NIM outlook, whilst NOII remains promising.
It was noted that the Malaysian region will be the core driver of NIM as the cost of funds situation eases, while there might be possible downside from its Indonesian region.
According to MIDF Research, CIMB’s NOII outlook seems promising considering several factors, including non-performing loan sales being at least equal to FY23’s results, as well as the retail fee outlook being solid as investment demand returns.
In addition, wholesale fees did exceptionally well in 1Q24, and despite trading and investment income being subjected to fluctuations, MIDF Research expects the group’s 2Q24 to shape up to be strong.
MIDF Research added that a possible one-off dividend is expected to be a capital optimisation measure as CIMB’s CET 1 rate is nearing the 15% level, well above the 13% of its peers.
“However, when considering a new sustainable dividend policy and further risk-weighted assets or RWA optimisation, we may have to wait until the rollout of the next multi-year plan, as it must be deliberated upon in tandem with growth expectations,” the research house said.
Kenanga Research then shared that the group expects further support in subsequent quarters via continued loan book growth, NIM recovery as well as other income streams to be generally better off.
“Meanwhile, the higher topline could serve to justify greater investments to boost capabilities and possibly uplift long-term ROE further,” the research house added.
In contrast to TA Research and MIDF Research, which maintained a “buy” call on CIMB, as well as Kenanga Research’s “outperform” rating, Hong Leong Investment Bank (HLIB) Research was the only brokerage that maintained a “hold” recommendation.
“All in all, we continue to believe CIMB’s risk-reward profile is balanced since its share price has done well year-to-date and is not inexpensive.
“Besides, its foreign shareholding level of 32% is now at its five-year peak.
“In turn, these should cap its share price upside going forward,” HLIB Research stated.
HLIB Research said it expects CIMB’s NIM to be stable in 2Q24 considering strict pricing discipline for both loans and deposits, and a less intense fixed deposit rivalry.
However, HLIB Research said its lending growth is seen to taper due to its “picky” business strategy.
“Separately, net credit cost is seen to remain steady at 30bps and 40bps.
“Besides, we are not overly concerned about any potential asset quality deterioration as we reckon CIMB is more equipped versus prior slumps, and loan loss coverage is now at 101% versus the pre-pandemic level of about 75%,” it added.