CIMB Receives "Maintain Buy" Rating from MIDF Research With Target Price of RM9.11

MIDF's report lauds CIMB Thai's 9MFY24 results, showing an 8.9% YOY net profit increase to THB1.89 billion, with a 4.5% rise in operating income and a 5.7% drop in credit losses. A 1.5% net interest income decline was offset by a 6.8% rise in fees and a 24.9% non-interest income increase. Operational Expenses(OPEX) rose 6.5%, but lower personnel costs eased the impact. The non-performing loan ratio improved to 2.5%. MIDF retains a 'BUY' rating, with the forecasts remaining unchanged, reflecting confidence in CIMB Group's performance.

CIMB Thai's 3QFY24 results showcased robust financial performance, with a notable 8.9% year-on-year increase in net profit to THB1.89 billion, primarily driven by a 4.5% year-on-year growth in operating income and a significant 24.9% year-on-year rise in non-interest income to THB2.54 billion.

This non-interest income growth was attributed to higher net gains on financial instruments measured at fair value through profit or loss. Despite a marginal 1.5% year-on-year decline in net interest income to THB7.25 billion due to a 30bps compression in net interest margin(NIM), the decline was offset by the increase in fees and non-interest income.

Operating expenses increased by 6.5% year-on-year to THB6.66 billion, yet lower personnel expenses helped to moderate the impact, resulting in a slightly higher cost-to-income ratio of 61.7% for 9MFY24 compared to 60.6% in 9MFY23. The asset quality also showed improvement, with the gross non-performing loan ratio decreasing to 2.5% from 3.3% as of December 31, 2023. The total gross loans grew by 2.7% year-to-date to THB251.5 billion, while deposits decreased by 8.6% year-to-date to THB283.7 billion.

The MIDF research report maintains a 'BUY' recommendation for CIMB Group Holdings Berhad, with an unchanged target price(TP) of RM9.11. This valuation is based on the FY25F P/BV of 1.29x, with assumptions including an FY25F ROE of 11.0%, LTG of 3.5%, and COE of 9.3%. The report highlights the strong earnings growth in Thailand, which is expected to positively contribute to the overall group's 9MFY24 result.

The report identifies several key risks that could impact CIMB Group's performance. These include steep net interest margin compression, which could affect net interest income; sharp cost inflation, which might increase operational expenses; and a weak non-operating income(NOII) and interest result, which could impact the group's profitability.

On the opportunities side, the report notes higher fees and NOII as positive factors, along with lower personnel costs that help moderate higher operating expenses and improvements in asset quality, which contribute to a more robust financial position.

MIDF's report is optimistic about CIMB Thai's contribution to the group's performance, with a strong set of results for 9MFY24. The asset quality improvement, offset of net interest income decline by higher fees and non-operating income and interest, and the lower personnel cost moderating higher operating expenses are seen as positive factors. Despite the risks mentioned, the report maintains its 'BUY' call due to the overall positive outlook and unchanged forecasts, reflecting confidence in the group's ability to navigate the identified risks and capitalize on the opportunities presented.