CIMB: Robust Performance and Strategic Capital Return Drive Optimistic Outlook

An investment bank research report indicates that a major financial institution delivered solid third-quarter 2025 results, aligning with analyst expectations and showcasing strong underlying operational performance. A significant highlight was the unexpected announcement of a MYR2 billion capital return plan, set to conclude by end-2027, which initiated with a 7 sen special dividend per share. This strategic move, coupled with a robust balance sheet, underpins the positive sentiment.

Performance Review

For the third quarter of 2025, the institution reported a net profit of MYR2.1 billion, representing a 10% sequential increase and a 2% year-on-year growth. This brought year-to-date earnings for the nine months of 2025 to MYR5.9 billion, maintaining a flat trajectory year-on-year but meeting 76% of both the investment bank’s and consensus full-year PATMI forecasts. The reported Return on Equity (ROE) stood at 11.3%, consistent with the bank’s FY24 ROE of 11.2% and within its 11-11.5% target range. Common Equity Tier-1 (CET-1) remained stable at 14.8%, even after accounting for the declared special dividend.

The strong financial performance was largely attributed to a combination of factors, including a significant rise in non-interest income, which surged by 20% quarter-on-quarter and 18% year-on-year. Furthermore, substantial non-loan expected credit loss (ECL) writebacks, primarily from corporate recoveries, provided a further boost. While net interest income (NII) remained relatively stable quarter-on-quarter and saw a modest 3% year-on-year decline, it demonstrated resilience despite regional overnight policy rate (OPR) cuts and lower policy rates. Strategic repricing efforts and robust current account savings account (CASA) growth, increasing 2% QoQ and 14% YoY, helped to mitigate the impact of softer asset yields.

Challenges and Mitigating Factors

Despite the overall positive results, the net interest margin (NIM) experienced a slight compression, slipping by 7 basis points quarter-on-quarter and 15 basis points year-on-year. This was largely due to decreased NIMs in key markets like Malaysia and Singapore. Loans growth remained flat quarter-on-quarter but showed a 3% year-on-year increase. However, the institution’s sustained focus on liquidity management resulted in total deposits rising 2% QoQ and 8% YoY, ensuring a liquid balance sheet with a Loan-to-Deposit Ratio (LDR) of 86.5%. Gross Impaired Loans (GIL) also saw an 11% QoQ and 16% YoY reduction, predominantly in Malaysia and Indonesia, supported by prudent provisioning which elevated Loan Loss Coverage (LLC) to 103%.

Future Outlook and Valuation

Management has reiterated its commitment to a comfortable CET-1 operating level of 14%. The MYR2 billion capital return plan is slated to be spread evenly over the next two years, with FY25 targets remaining intact. The institution anticipates NIM to hold steady in the fourth quarter of 2025, driven by deposit repricing in Malaysia and Singapore, though the absence of certain one-off NIM uplifts in Indonesia may temper overall gains. Share buybacks remain a possibility if the stock is considered undervalued.

In light of the strong results and future prospects, the investment bank has revised its full-year 2025-2027 Dividend Per Share (DPS) forecasts upwards by 17%, 14%, and 13% respectively, incorporating the capital return. Consequently, the target price has been raised to MYR8.55 (from MYR8.40), representing a 12% potential upside, after rolling forward the valuation to FY26F and applying a 6% ESG premium. The institution maintains a “BUY” recommendation.