CIMB: Financial Group Posts Resilient Profit, Outperforming Estimates on Strong Cost Management
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent financial group has reported a resilient performance for the second quarter and first half of FY2025, with net profit exceeding analysts’ expectations. The improved results were primarily driven by robust cost management and strong non-interest income growth.
Performance Highlights
For the second quarter of FY2025, the group recorded a net profit of RM1.89 billion, a 3.7% decline year-on-year. However, the profit saw a significant 6.0% quarter-on-quarter increase to RM1.96 billion, comfortably surpassing both PublicInvest Research’s and consensus estimates for the period. The positive momentum extended into the first half of FY2025, where the net profit of RM3.86 billion, despite a marginal 0.9% year-on-year dip, also outperformed market expectations.
Key Drivers of Outperformance
The outperformance was largely attributed to stringent cost controls, with operating expenses falling by 0.9% year-on-year and 1.1% quarter-on-quarter. This efficiency was supported by disciplined management of technology and marketing expenditures, alongside ongoing group-wide cost initiatives. Non-interest income (NOII) also played a crucial role, demonstrating strong growth of 5.3% quarter-on-quarter, fueled by higher income from fund management and improved NPS (New Private Sales) sales. While the Net Interest Margin (NIM) experienced a 7 basis points year-on-year contraction, it showed a sequential improvement, expanding 2 basis points quarter-on-quarter to 1.97%, primarily due to lower fixed deposit rates.
Challenges and Future Outlook
Despite the strong results, the group faced challenges, including a notable increase in loan loss provisions, which surged by 29.3% quarter-on-quarter. This resulted in a first-half credit cost of 29 basis points. Gross loans exhibited a 3.6% year-on-year growth on a constant currency basis. Looking ahead, management remains steadfast in its commitment to achieving a Return on Equity (ROE) target of over 10% for FY2025. The group also projects loan growth for FY2025 to be within the 5.5% to 6.0% range and intends to maintain its dividend payout ratio between 40% and 60%.
Investment Recommendation
TA Securities has issued a “BUY” recommendation for the stock, setting a target price of RM0.25, which implies a 25.0% upside potential from its last traded price of RM0.20.
