CIMB: Financial Group Delivers Solid Half-Year Results, Buy Rating Affirmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM8.45 (+13.7%) |
| Last Traded | RM7.43 |
| Recommendation |
A prominent financial conglomerate reported a 1HFY25 net profit of RM3,862 million, marking a slight 0.9% year-on-year contraction. Despite this minor dip, the results were well within expectations, achieving 47% of the full-year forecast. The annualised Return on Equity (ROE) stood at 11.1%, aligning with the FY25 guidance of 11.0-11.5%. An interim dividend of 19.75 sen per share was proposed, representing a payout of 55.5%.
Performance Review
The year-on-year decline in net profit was primarily attributed to lower operating income, which fell by 1.2%, and a marginal increase in overhead expenses. Non-interest income also saw a 3.7% year-on-year decline. However, on a quarter-on-quarter basis, non-interest income demonstrated resilience, growing 5.3% due to strong trading income and higher non-performing loan (NPL) sales.
Net Interest Income (NII) remained steady at RM7.65 billion, with a marginal 0.4% quarter-on-quarter increase. This was supported by robust loan growth of 3.6% year-on-year on a constant currency basis. Despite this, the group’s Net Interest Margin (NIM) experienced a slight slip of 1 basis point quarter-on-quarter and 7 basis points year-on-year. While NIM broadened in Malaysia by 4 basis points, this was offset by declines in Indonesia (-25 bps), Singapore (-4 bps), and Thailand (-35 bps).
The loan portfolio displayed resilience across key segments, with Consumer Banking and Commercial Banking registering growths of 2.7% and 4.2% year-on-year, respectively. Total deposits expanded by 4.9% year-on-year, with CASA balances improving significantly by 13.7% year-on-year, elevating the CASA ratio to 44.0%.
Operating expenses expanded marginally year-on-year, driven by higher Marketing and Technology expenses. However, Personnel, Establishment, and Admin & General costs saw reductions, leading to a 1.1% quarter-on-quarter contraction in operating expenses. The Cost-to-Income (CTI) ratio widened slightly to 46.2% from 45.6% in 1HFY24 due to negative JAWs.
Asset Quality and Capital Strength
The financial group reallocated approximately RM500 million in overlay during the quarter to mitigate macro uncertainties. Despite this, 1HFY25 provisions decreased to RM715 million from RM802 million in 1QFY25, primarily due to lower loan impairment in the retail segment. The loan loss charge for the half-year stood at 29 basis points, an increase of 6 basis points quarter-on-quarter due to lower writebacks and the timing of overlay reallocations.
Asset quality showed improvement, with the gross impaired loans ratio narrowing to 2.1% from 2.5% in 2QFY24. However, allowance coverage slightly declined to 100.7% from 101.2%. The group maintains a strong capital position, with Common Equity Tier 1 (CET1) Capital Ratio and Total Capital Ratio at 14.7% and 18.3%, respectively, and its Liquidity Coverage Ratio (LCR) comfortably above 100% across all banking entities.
Outlook and Strategy
Management acknowledges anticipated macro headwinds, including regional rate declines, weaker FX translation, and softer operating conditions. Nevertheless, the underlying franchise remains healthy, with asset quality continuing to improve and credit cost well-contained. Loan momentum is expected to accelerate in 2HFY25, supported by tariff clarity and growth opportunities arising from rising economic zones, such as the committed RM10 billion financing for the Johor-Singapore Special Economic Zone and broader sustainable finance goals targeting RM300 billion by 2030. Loan and deposit growth guidance remains intact at 5-7%.
To mitigate downward pressure on NIM from lower ASEAN rates, the group is adopting a more deposit-led strategy and active cost-of-funds management. Management maintains its full-year guidance for a 5-8 basis points year-on-year NIM contraction, expecting near-term softness in Malaysia and Singapore post-OPR cuts, but foresees positive momentum in later quarters. The group is banking on a gradual recovery in business confidence and global tariff clarity, driven by its “Forward 30” strategy emphasizing technology and digital investments, disciplined deposit-led funding, and responsible asset growth, all contributing to resilience against short-term macro volatility.
Analyst’s View
TA SECURITIES has reiterated its BUY recommendation for the financial group. The target price has been adjusted to RM8.45, implying a 13.7% upside from the last traded price of RM7.43. This valuation is based on an implied Price-to-Book Value (PBV) of approximately 1.17x, derived from the Gordon Growth Model and incorporating a 3% ESG premium.
