CIMB GROUP: Revisiting old flame?

(BUY Maintained, TP:RM10.30)

The valuation gap between CIMB’s Malaysia and Singapore banks has widened to levels that are increasingly difficult to justify.

“We believe this should drive a rotation back into M’sian banks, supported by superior yields and undemanding valuations.

CIMB GROUP

“CIMB remains our preferred large-cap pick, offering attractive 6-7% yield vs S’pore peers: 3-4%,” says Ambank research.

Foreign shareholding has also fallen 6ppt to 30% from its 2-year peak, leaving scope for re-accumulation. Retain BUY and TP of RM10.30.

CIMB hosted an analyst briefing to provide updates on its latest operational developments. Management indicated that it has yet to observe any meaningful deterioration in asset quality directly related to the Iran war, although pockets of stressed have emerged within certain customer segments.

SME

However, as a precautionary measure, CIMB plans to reallocate trade-related management overlays for potential risks, especially within selected SME and lower-income consumer borrowers.

“While CIMB Niaga is likely to face persistent margin pressure, we expect this to be offset by NIM normalisation in Malaysia, supporting a broadly stable group NIM.

“We believe that resilient non-interest income (NOII) growth, supported by strong trading and FX income as well as wealth management fees, should cushion any margin headwinds.

“Therefore, we maintain our Outperform call with an unchanged GGM-derived TP of RM9.10, as we expect earnings to remain resilient, underpinned by healthy NOII growth and an attractive dividend yield of 6%,” says PIB.

#businessnews