Despite strong Malaysian and Singapore Performance, CIMB Group Holdings Bhd's Indonesian operation through CIMB Niaga saw recent trim of Return on Equity (ROE) to 14.5%-15.0% from 15.0%-16% due to grim Net Interest Margin (NIM) outlook, according to Kenanga Investment Bank Bhd (Kenanga Research).
The strong liability management effors of CIMB Malaysia and CIMB Singapore have served as a cushion to the weaker Indonesian performance.
Analysts believe that CIMB Group's 11.0%-11.5% ROE target for 2024 is still within reach though the group's majority-owned CIMB Niaga recently trimmed its ROE by 0.5%-1% to 14.5%-15.0%.
Kenanga Research has maintained the MARKET PERFORM call for CiMB Group with a target price of RM7.60 (COE1: 11.2%, TG2: 3.5%, ROE: 11.5%).
As at 3:15pm on Nov 7, CIMB Group's stock traded at RM8.25, up by five sen from its previous closing price of RM8.20 on a volume of 12.2 million (12,235,200) shares.
CIMB Group had consciously stepped back more from less profitable wholesale businesses which drew higher interest rates as compared to retail fixed deposits.
The seasonal fourth quarter competition in the fixed deposits space will strain profitability in the near-term as banks typically secure liquidity ahead to support financing targets at the start of the following year.
Analysts reflected a slight increase of NIMs to 2.24% (+2 bps, from the group's guidance of stable to +5 bps) in their 2024 assumptions. The full-year ROE of 10.6% is below the group's target, possibly stemming from softer Non-interest Income (NOII) trajectory that they prefer to maintain.
- COE: Cost of Equity ︎
- TG: Targeted Growth ︎
