CIMB: Financial Performance Exceeds Expectations Driven by Cost Controls
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent financial group has announced robust fourth-quarter results for the financial year 2023, surpassing market expectations. The group reported a headline net profit after tax and minority interests (PATMI) of RM2.0 billion for the quarter, bringing the full-year 2023 PATMI to RM6.9 billion, a significant 26.0% year-on-year increase. This performance exceeded both the investment bank’s and consensus full-year estimates, reaching 104% and 107% respectively.
Performance Review
The impressive financial outcome was primarily attributed to lower operating expenses and reduced credit costs, which effectively offset a softer non-interest income (NOII) contribution. Loan growth momentum experienced a significant uptick, particularly driven by strong drawdowns in Malaysia and a robust performance in wholesale loans. Despite a subdued loan growth in Thailand, the overall growth trajectory remained positive, aided by an improvement in the net interest margin (NIM) due to deposit repricing efforts. Asset quality remained healthy, with management reporting stable gross impaired loans.
Key Drivers and Challenges
Cost efficiencies played a pivotal role in the group’s earnings beat. Management demonstrated a strong commitment to cost controls, leading to lower-than-expected operating expenses. Additionally, a prudent approach to credit risk management resulted in favorable credit costs. While the group saw strong growth in several key segments, it faced challenges with softer utilization rates impacting certain fee-generating activities and a moderated non-interest income environment. The strategy of translating strong earnings into lower credit costs and maintaining healthy asset quality were key success factors.
Future Outlook
Looking ahead, the financial group anticipates a sequential improvement in net interest margin as deposit repricing continues. Management expects net credit cost to ease further, supported by improving economic conditions that are likely to reduce expected credit losses. The group continues to benefit from its attractive dividend yield and ongoing capital return programs. Reflecting this positive outlook and strong performance, TA SECURITIES has reiterated a BUY recommendation for the stock, setting a target price of RM0.25, which represents a significant upside from the last traded price of RM0.20.
