KUALA LUMPUR: PublicInvest Research believes near-term growth for CIMB Group
Holdings Bhd will likely fall short of expectations despite the Malaysian operations providing a backstop to regional weakness.
However, the research house said there remains scope for earnings upsides if the group's regional exposures make earlier-than-expected turnarounds.
In Malaysia, July and August saw some pick-up in activity post General Election-related uncertainty but has since wavered again ahead of Budget-related uncertainties, said PublicInvest.
"Overall loans growth for the year should be around the mid-to-high single digits range with the retail segment being the main driver," it said.
It added that the transaction with Jupiter Securities pursuant to the partnership with China Galaxy Securities is two-thirds completed and should be completed by year-end or early next year.
The Indonesian arm faces challenges from external factors, which are expected to persist for the next six to nine months at least.
The country sees compressed margins from rate hikes, a slumping currency and an upcoming presidential elections that has stifled activities.
"The saving grace however is that asset quality improvements continue afoot, with provisions expected to trend down even further," said PublicInvest.
In Thailand, asset quality continues to imorive amid stable loans growth although earnings are hampered by a rise in operating expenses due to higher personnel costs.
"These are reflected in CIMB Thai’s 9MFY18 numbers released last Friday in which consolidated income was up 2.5% YoY to THB10.1bn (NIM), though operating expenses rose a sharper 10.8% YoY to THB6.0bn."
PublicInvest lowered FY18 to FY20 earnings estimates by an average 5.2% to account for slightly lower margins going forward while adjusting for translation-related effects from currency weakness.
Nevertheless, the research house remains optimistic over the group's longer-term prospects.
It maintained its outperform call on the counter with target price lowered to RM6.50 from RM7.40 previously.
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