CIMB: Non-Interest Income Bolsters Performance Amidst Cost Efficiencies

TA SECURITIES has reiterated its “BUY” recommendation, maintaining its target price, citing strong non-interest income growth and disciplined cost management as key drivers for resilient performance. Management’s recent update meeting highlighted several positive trends and strategic outlooks despite some headwinds.

Performance Review

The second quarter saw a notable 5.3% quarter-on-quarter increase in non-interest income (non-NII), predominantly driven by a robust 10.4% surge in trading income. This positive momentum is anticipated to continue, with expectations for further sequential improvement in non-NII in the third quarter. Trading and FX activities are projected to remain strong, aligning with global trends, while investment gains are also expected to contribute positively due to favorable rate movements.

Fee income is projected to remain stable, underpinned by a healthy deal pipeline and management’s guidance of continued positive deal flow supporting investment banking fees over the coming quarters. Furthermore, the company demonstrated strong cost discipline, with its cost-to-income ratio (CTI) standing at 46.2% in 1H25. Operating expenses saw a 1.1% quarter-on-quarter decline, reflecting continuous execution of tactical cost-optimization initiatives, particularly in establishment and technology-related areas. This proactive cost management is expected to keep the overall cost trajectory contained for the year.

Challenges and Asset Quality

Despite the positive non-NII performance, loan growth presented a mixed picture, contracting marginally by 0.2% quarter-on-quarter but rising 1.0% year-on-year in the second quarter. Loan growth is expected to remain subdued in the third quarter, primarily due to slower-than-expected loan drawdowns and adverse FX headwinds from a stronger Ringgit against the Indonesian Rupiah and Singapore Dollar. However, management remains optimistic, noting a healthy overall loan pipeline and anticipating stronger loan growth materializing in the fourth quarter and extending into 2026.

Net Interest Margin (NIM) experienced a marginal easing of 1 basis point quarter-on-quarter to 2.15% in the second quarter. A sequential compression is expected in the third quarter, largely attributable to the 25 basis points policy rate cut in Malaysia and lower SORA levels in Singapore. Deposit competition in Malaysia remained stable, while proactive rate adjustments in Singapore are expected to bring some stabilization.

Asset quality remains stable, despite a slight uptick in impaired loans in the third quarter, which management deemed manageable. The bank continues to actively monitor asset quality and engage with affected customers, with no specific geography or income segment identified as a key driver of concern. Management reaffirmed its full-year credit cost guidance of 25-35 basis points, supported by disciplined credit risk management, indicating confidence in maintaining asset quality.

Future Outlook and Recommendation

Overall, the company is poised to deliver a decent third-quarter performance, bolstered by resilient non-NII and stable asset quality, even with some pressure from NIM compression and softer loan growth. Capital accretion continues to be positive, providing a solid buffer to support ongoing business growth and sustain shareholder returns. TA SECURITIES maintains its forecasts and reiterates a “BUY” recommendation, with the target price unchanged.