CIMB (CIMB MK): Watch Out For Capital Build In Upcoming 2Q25 Results
24 July 2025
- Keep BUY and MYR8.40 TP, 26% upside and c.6% yield. CIMB held its pre-closed period meeting yesterday (2Q25 results out on 28 Aug). While we think its upcoming 2Q25 is unlikely to yield any major surprises, positive or negative, flipside, YoY pre-tax profit growth could be muted. Watch out for signs of strong capital build up. CIMB reiterated it does not intend to hang on to excess capital and remains open to opportunities to optimise its capital.
- Signs of cautiousness from non-retail. CIMB said 2Q25 loans growth momentum largely mirrored that in 1Q25 – ie low-single digit reported growth driven by drawdown of pipeline by its consumer and SME segments. The non-retail segment, though, continues to adopt a wait-and-see stance, coupled with CIMB remaining disciplined in terms of wholesale loan pricing, there could be downside risk to the 5-7% loan growth target. Recall that we had trimmed our FY25F loans growth assumption to 4% from 5% post release of its 1Q25 results, which we keep unchanged at this juncture.
- Group NIM was likely stable QoQ. Malaysia NIM improved QoQ thanks to: i) Continued optimisation of its funding composition; and ii) impact from the lower Statutory Reserve Requirement in May. Singapore NIM also improved QoQ as the repricing of deposits from a lower benchmark rate was felt in 2Q, as well as the impact from deposit campaigns rolling off the book. On the other hand, NIM in Thailand was impacted by some one-off adjustments. CIMB did not comment much on Indonesia as its 2Q25 results will be out next week but judging from the overall group and NIM trends in key markets above, NIM in Indonesia likely experienced some compression sequentially. Looking ahead, impact from the 25bps Overnight Policy Rate (OPR) cut should impact group NIM by a mere 1-2bps. CIMB had cut its campaign and board deposit rates by 10-20bps/5-10bps respectively in May, followed by a full pass-through of the OPR cut. All else equal, NIM could rise in 2026.
- Non-II – 2Q25 a good quarter. Trading & FX income stayed healthy in 2Q25, benefiting from the market volatility (positive for spreads and volume), but this was slightly offset by softer fees QoQ. Overall though, 2Q25 was a good quarter for non-II. Looking ahead, management was positive on the outlook for fees (eg efforts to improve cross selling within wholesale), and other income but trading & FX income is harder to predict.
- Asset quality holding up well with no adverse signs from the impact of US tariff policies. As inflationary pressures have been muted thus far, CIMB will continue with plans to reallocate overlays it had built up earlier for its Malaysia consumer portfolio (potential inflationary impact from subsidy rationalisation) to emerging risks relating to the global trade uncertainties.
- Sees room to optimise capital should the capital build up pan out better than expected (eg due to weak loans growth). The two options available to CIMB are: i) Special dividends, which it has done in the past; and ii) share buybacks, given the correction in share price. No firm decision has been made for now.
Buy (Maintained)
Target Price (Return): MYR8.40 (+26%)
Price (Market Cap): MYR6.67 (USD16,944m)
ESG score: 3.3 (out of 4)
Avg Daily Turnover (MYR/USD): 101m/23.8m
Analysts
David Chong CFA
+603 2302 8106
david.chongvc@rhbgroup.com
Nabil Thoo
+603 2302 8123
nabil.thoo@rhbgroup.com
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (18.7) | (1.9) | (2.6) | (16.3) | (7.4) |
| Relative | (11.2) | (2.1) | (3.8) | (12.6) | (0.6) |
52-wk Price low/high (MYR) 6.35 – 8.49
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Reported net profit (MYRm) | 6,981 | 7,728 | 7,859 | 8,226 | 8,713 |
| Net profit growth (%) | 28.3 | 10.7 | 1.7 | 4.7 | 5.9 |
| Recurring net profit (MYRm) | 6,981 | 7,728 | 7,859 | 8,226 | 8,713 |
| Recurring EPS (MYR) | 0.65 | 0.72 | 0.74 | 0.77 | 0.81 |
| BVPS (MYR) | 6.41 | 6.49 | 6.83 | 7.41 | 7.57 |
| DPS (MYR) | 0.36 | 0.40 | 0.41 | 0.43 | 0.44 |
| Recurring P/E (x) | 10.19 | 9.20 | 9.05 | 8.65 | 8.28 |
| P/B (x) | 1.04 | 1.03 | 0.98 | 0.90 | 0.88 |
| Dividend Yield (%) | 5.4 | 6.0 | 6.1 | 6.4 | 6.6 |
| Return on average equity (%) | 10.7 | 11.2 | 11.1 | 10.8 | 10.8 |
Source: Company data, RHB
Overall ESG Score: 3.3 (out of 4)
E Score: 3.0 (GOOD)
S Score: 3.3 (EXCELLENT)
G Score: 4.0 (EXCELLENT)
Please refer to the ESG analysis on the next page
Emissions And ESG
Trend analysis
YoY rise in Scope 1 and 3 emissions due to expanded reporting scope, such as inclusion of overseas operations as well as categories.
| Emissions (tCO2e) | Dec-22 | Dec-23 | Dec-24 | Dec-25 |
|---|---|---|---|---|
| Scope 1 | 2,638 | 3,077 | 4,327 | na |
| Scope 2 | 86,336 | 84,813 | 85,578 | na |
| Scope 3 | 4,242 | 5,245 | 42,161 | na |
| Total emissions | 93,216 | 93,135 | 132,066 | na |
Source: Company data, RHB
Latest ESG-Related Developments
Committed to implement TCFD recommendations: Have implemented majority of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations and committed to disclosing all TFCD recommendations.
Climate-related KPIs: CIMB utilises its scorecards to mobilise and orientate group-wide efforts and contributions towards a set of common sustainability and climate goals, which include reduction in Scope 1 and 2 GHG emissions and green financing for retail and non-retail clients.
Establishing interim climate targets: Published first round of 2030 climate targets for thermal coal mining and cement sectors in 2022 with the goal of halving exposure to thermal coal mining sector by 2030 and to phase out by 2040, while decreasing the physical intensity of financing clients in the cement sector by 36% by 2030.
ESG Unbundled
Overall ESG Score: 3.3 (out of 4)
Last Updated: 17 April 2025
E Score: 3.0 (GOOD)
In FY24, the group achieved 36% reduction in Scope 1 and 2 GHG emissions vs its baseline year of FY19. CIMB was also the first MY bank to report Scope 3 financed emissions, and has developed transition plans for high-risk customers in the cement and thermal coal mining sectors.
S Score: 3.3 (EXCELLENT)
CIMB is involved in several financial inclusion initiatives for low-income, new-to-credit individuals and SMEs in its multiple markets. CIMB employees also receive an average of over 80 hours of training pa, the highest among MY banks. In late-2021, processing error related to a third-party remittance service led to some 11,800 CIMB customers receiving double credits. The bank made provisions of MYR281m for the double credits.
G Score: 4.0 (EXCELLENT)
The Board of Directors comprises six Independent Directors, three non-independent members, and the Group CEO is an Executive Director. Top management is subject to sustainability-linked remuneration.
Financial Exhibits
Valuation basis
GGM-derived intrinsic value with an ESG overlay. Key GGM assumptions are:
- COE of 10%;
- ROE of 11%;
- 3.5% long-term growth.
Key drivers
Our earnings are most sensitive to changes in:
- Credit cost;
- Net interest margin;
- Non-interest income growth.
Key risks
Downside risks include:
- Deterioration in asset quality resulting in higher-than-expected credit costs;
- Higher-than-expected NIM compression;
- Weaker-than-expected recovery in economic activities.
Company Profile
CIMB is a fully integrated financial services group and the second largest domestic bank in Malaysia. The group’s core markets are Malaysia, Indonesia, Singapore and Thailand.
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| EPS | 0.65 | 0.72 | 0.74 | 0.77 | 0.81 |
| Recurring EPS | 0.65 | 0.72 | 0.74 | 0.77 | 0.81 |
| DPS | 0.36 | 0.40 | 0.41 | 0.43 | 0.44 |
| BVPS | 6.41 | 6.49 | 6.83 | 7.41 | 7.57 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 10.19 | 9.20 | 9.05 | 8.65 | 8.28 |
| P/B (x) | 1.0 | 1.0 | 1.0 | 0.9 | 0.9 |
| Dividend Yield (%) | 5.4 | 6.0 | 6.1 | 6.4 | 6.6 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Interest income | 33,815 | 36,253 | 37,476 | 38,912 | 40,605 |
| Interest expense | (19,189) | (20,856) | (21,919) | (22,919) | (23,895) |
| Net interest income | 14,626 | 15,397 | 15,557 | 15,993 | 16,710 |
| Non interest income | 6,388 | 6,904 | 7,240 | 7,774 | 8,197 |
| Total operating income | 21,014 | 22,301 | 22,798 | 23,768 | 24,907 |
| Overheads | (9,865) | (10,420) | (10,752) | (11,236) | (11,685) |
| Pre-provision operating profit | 11,149 | 11,881 | 12,046 | 12,532 | 13,222 |
| Loan impairment allowances | (1,360) | (1,125) | (1,399) | (1,443) | (1,479) |
| Other impairment allowances | (232) | (379) | (100) | (50) | (50) |
| Income from associates | (17) | 19 | 20 | 21 | 22 |
| Pre-tax profit | 9,541 | 10,396 | 10,567 | 11,060 | 11,716 |
| Taxation | (2,379) | (2,477) | (2,515) | (2,632) | (2,788) |
| Minority interests | (181) | (191) | (193) | (202) | (214) |
| Reported net profit | 6,981 | 7,728 | 7,859 | 8,226 | 8,713 |
| Recurring net profit | 6,981 | 7,728 | 7,859 | 8,226 | 8,713 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Return on average assets (%) | 1.0 | 1.0 | 1.0 | 1.0 | 1.1 |
| Return on average equity (%) | 10.7 | 11.2 | 11.1 | 10.8 | 10.8 |
| Return on IEAs (%) | 5.2 | 5.2 | 5.2 | 5.2 | 5.2 |
| Cost of funds (%) | 3.3 | 3.4 | 3.4 | 3.4 | 3.5 |
| Net interest spread (%) | 1.9 | 1.8 | 1.8 | 1.7 | 1.7 |
| Net interest margin (%) | 2.2 | 2.2 | 2.2 | 2.1 | 2.1 |
| Non-interest income / total income (%) | 30.4 | 31.0 | 31.8 | 32.7 | 32.9 |
| Cost to income ratio (%) | 46.9 | 46.7 | 47.2 | 47.3 | 46.9 |
| Credit cost (bps) | 32.1 | 25.2 | 30.3 | 30.1 | 29.5 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total gross loans | 440,863 | 452,244 | 470,104 | 488,714 | 512,907 |
| Total assets | 733,572 | 755,131 | 781,982 | 812,419 | 841,697 |
| Customer deposits | 482,426 | 496,394 | 516,617 | 537,668 | 559,583 |
| Total liabilities | 663,733 | 684,292 | 707,384 | 731,420 | 756,436 |
| Shareholders’ equity | 68,327 | 69,244 | 72,810 | 79,009 | 83,056 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Reported NPLs/gross cust loans (%) | 2.7 | 2.1 | 2.0 | 1.9 | 1.8 |
| Total provisions / reported NPLs (%) | 97.0 | 105.3 | 102.6 | 98.9 | 95.6 |
| CET-1 ratio (%) | 14.5 | 14.9 | 15.4 | 15.7 | 16.7 |
| Tier-1 ratio (%) | 15.1 | 15.5 | 16.0 | 16.3 | 17.3 |
| Total capital ratio (%) | 18.2 | 18.6 | 18.9 | 19.2 | 20.0 |
Source: Company data, RHB
Valuation and TP
We maintain our MYR8.40 TP, which is based on an intrinsic value of MYR7.92. The intrinsic value has been derived from our GGM-based fair P/BV of 1.15x, which is at a slight discount to the stock’s long-term mean of 1.22x.
Our TP also includes an unchanged 6% ESG premium applied to reflect its ESG score of 3.3 (based on RHB’s in-house methodology), which is above the country median of 3.0.
CIMB – GGM valuation with ESG overlay
Source: Company data, RHB
Recommendation History
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-06-02 | Buy | 8.40 | 6.93 |
| 2025-04-17 | Buy | 8.40 | 6.76 |
| 2025-03-02 | Buy | 9.25 | 7.81 |
| 2024-11-29 | Buy | 9.25 | 8.25 |
| 2024-10-15 | Buy | 9.25 | 8.25 |
| 2024-10-11 | Buy | 8.90 | 8.22 |
| 2024-09-02 | Neutral | 8.90 | 8.30 |
| 2024-07-29 | Buy | 8.00 | 7.24 |
| 2024-06-02 | Buy | 7.60 | 6.84 |
| 2024-05-06 | Buy | 7.60 | 6.75 |
| 2024-03-21 | Buy | 7.60 | 6.55 |
| 2024-03-01 | Buy | 7.35 | 6.34 |
| 2023-10-24 | Buy | 6.88 | 5.68 |
| 2023-08-31 | Buy | 6.88 | 5.63 |
| 2023-06-01 | Buy | 6.00 | 4.86 |
Source: RHB, Bloomberg
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
This report has been prepared for information purposes only. The information contained herein is based on sources believed to be reliable and correct at the time of issue of this report. However, such sources have not been independently verified by RHB and/or its affiliates and this report does not purport to contain all information that a prospective investor may require. The opinions expressed herein are RHB’s present opinions only and are subject to change without prior notice. RHB is not under any obligation to update or keep current the information and opinions expressed herein or to provide the recipient with access to any additional information. This report does not constitute an offer or solicitation to buy or sell any securities or related financial instruments.
RESTRICTIONS ON DISTRIBUTION
Malaysia
This report is issued and distributed in Malaysia by RHB Investment Bank Berhad (“RHBIB”).
Indonesia
This report is issued and distributed in Indonesia by PT RHB Sekuritas Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia.
Singapore
This report is issued and distributed in Singapore by RHB Bank Berhad (through its Singapore branch) which is an exempt capital markets services entity and an exempt financial adviser regulated by the Monetary Authority of Singapore.
United States
This report was prepared by RHB is meant for distribution solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended.
