CIMB Group Holdings Bhd is set for a positive financial performance in the third quarter of 2024 (3Q24), with expected year-on-year growth driven by improved net interest margins (NIM) and trading income, according to recent analyses from RHB Investment Bank Bhd (RHB Research) and Maybank Investment Bank Bhd (Maybank IB).
Both research houses maintained their BUY calls with their target price ranging between RM9.20 and RM9.25, representing a 12%-13% upside.
RHB Research's forecast suggests mid to high single-digit profit after tax and minority interests growth for CIMB in 3Q24 despite potential challenges in 4Q24 due to seasonal deposit competition in Malaysia and asset repricing in Singapore. Additionally, the report noted that CIMB's nine-month performance is anticipated to surpass 75% of the financial year of 2024 (FY24) estimates, supported by enhanced operating income from strategic liability management in Malaysia and Singapore, which has helped offset NIM pressures experienced by CIMB Niaga, the bank's Indonesian subsidiary.
The bank is also benefitting from improved trading and foreign exchange income, which rebounded after a weaker 2Q24. Gains from non-performing loan sales by CIMB Niaga are expected to contribute positively as well.
Maybank IB, meanwhile, expects CIMB's NIM to see sequential improvement for the third consecutive quarter, supported by robust non-interest income and manageable regional currency impacts. However, the research house cautioned that sustaining NIM levels into the 4Q may be more challenging due to intensified deposit competition.
Maybank IB's report further highlights CIMB's proactive asset yield protection, noting that loan growth may fall short of management's 5%-7% target for FY24. Nonetheless, credit cost could perform favourably against guidance, potentially surprising at lower-than-expected levels, while CIMB's projected FY24 return on equity (ROE) of 11.1% remains within management's target of 11%-11.5%.
The group's share price has seen a robust performance this year, rising around 40% year-to-date and closing at RM8.20 with a market capitalisation of US$20.2 billion.
Both RHB Research and Maybank IB view CIMB's consistent financial health and stable growth prospects as signs of further potential for re-rating, particularly with CIMB's upcoming mid-term plans that aim for an even higher ROE target. CIMB's 3Q quarter results are scheduled for release on Nov 28.
