Maybank IB Research said CIMB’s loan growth momentum also appeared encouraging, with the group targeting a loan growth of 5% to 6% for 2023.
PETALING JAYA: CIMB Group
Holdings Bhd will likely see a bottoming out of its net interest margin (NIM) in the second quarter ended June 30, 2023 (2Q23).
Following a recent meeting with CIMB’s management, analysts pointed out that the second-largest banking group in Malaysia would likely see a gradual recovery in NIM in the final six months of 2023.
“We understand that margin pressure persisted and NIMs are likely to have further compressed quarter-on-quarter (q-o-q) in 2Q23, but only to a marginal extent,” Maybank Investment Bank (IB) Research said.
“Into the second half of 2023 (2H23), NIM pressure is likely to persist in Singapore, but the group expects to see improvements across its other key markets and for NIMs to be stronger in 2H23 versus 1H23,” it added.
According to Maybank IB Research, CIMB’s loan growth momentum also appeared encouraging, with the group targeting a loan growth of 5% to 6% for 2023.
“Positive as well is the fact that group non-interest income (NOII) was stronger q-o-q in 2Q23, driven predominantly by higher trading and foreign exchange income, as well as other income, for example, from interest rate swaps,” it added.
CIMB is expected to release its 2Q23 results on Aug 30.
Maybank IB Research raised its target price for CIMB to RM6.15 from RM5.85 after rolling forward valuations to 2024 on an unchanged price-to-book-value (P/BV) of 0.9 times. It maintained its “buy” call on the counter.Also maintaining its “buy” call on CIMB, RHB Research kept its target price for the counter unchanged at RM6.
“We gathered that NIM pressure appears to be alleviating, with a 2H23 recovery being a possibility,” the brokerage said.
“Overall, its 2Q23 operating income looks decent and, while delinquencies ticked up, ample provisioning buffers will help shield the impact on earnings,” it added, noting that CIMB’s 2Q23 results should be on track to meet consensus expectations.
RHB Research pointed out that retail delinquencies had continued to rise for CIMB due to inflation and from certain quarters where income streams had yet to normalise.
“That said, the rise is still within CIMB’s expectations and, more importantly, its overlays have been able to absorb the impact,” it said, noting that management expected delinquencies to peak in 4Q23.
Meanwhile, MIDF Research said while CIMB’s management had guided for further improvement in NIM in 2H23, it would unlikely to return to the highs of 2H22.
The brokerage noted CIMB would likely see NOII being a major earnings driver for 2Q23.By geographical segment, MIDF Research said: “Malaysia was sequentially stronger, driven by better treasury incomes. There should be some uplift from improved deal pipeline in 2H23.”
“Singapore should also perform strongly, with the group taking tactical interest rate swaps, effectively sacrificing net interest income for NOII,” it added.
According to MIDF Research, Indonesia (CIMB Niaga) did see better quarterly “other income” via more non-performing loan (NPL) sales. This should offset a more challenging outlook for trading and foreign exchange.
“The group is still calibrating its approach towards NPL sales, to make it a less lumpy source of income,” it said.
Meanwhile, Thailand (CIMB Thai) should see some challenges ahead, especially following an exceptional 2022, MIDF Research said.
The brokerage maintained “buy” on CIMB, with a higher target price of RM6.39, as compared with RM5.92 previously.
