Will CIMB Continue to Rise?

CIMB Group Holdings Bhd is a full-service bank based mainly in Malaysia and other associations of Southeast Asian Nations. The bank's segment includes Consumer Banking, Commercial Banking, Wholesale Banking, and CIMB Digital Assets and Group Funding.

for the quarter reached MYR 3,792 million, marking a 2.5% QoQ increase driven by a 3 basis points (bps) expansion in Net Interest Margin (NIM), supported by lower cost of deposits in Malaysia and improved loan yields in Indonesia. Additionally, NII grew by 7.7% YoY due to strong loan and securities growth, despite an 8 bps contraction in NIM.

reached MYR 1,837 million, showing growth of 24.5% YoY and 9.7% QoQ. This increase was driven by capital market and investment-related income, as well as gains from Non-Performing Loan (NPL) sales.

Operating expenses declined by 2.8% quarter-over-quarter (QoQ) due to the absence of year-end expense accruals. However, there was an 8.9% year-over-year (YoY) increase, driven by higher personnel and marketing costs, which were impacted by inflation and foreign exchange (FX) factors. Investment in technology continues as planned.

The cost-to-income ratio (CIR) for the first quarter of 2023 (1Q23) improved by 350 basis points (bps) QoQ and 160 bps YoY to 45.3%, benefiting from a positive JAW, which was supported by strong income growth.

Net profit reached MYR 1,923 million, growing 12.9% QoQ and 17.7% YoY, resulting in an improved first-quarter 2024 Return on Equity (ROE) of 11.4% (+130 basis points QoQ and +110 basis points YoY).

Total gross loans increased by 7.0% to RM442.3 billion YoY while total deposits grew by 8.2% YoY to RM505.9 billion. The Group registered a loan-to-deposit (LDR) ratio of 87.4% as at 1Q24, which represents a decline compared to 88.3% in 1Q23 and 88.6% in 4Q23.

Current Account Savings Account (CASA) grew strongly by 16.8% YoY, leading to the CASA ratio expanding to 40.8% as at 1Q24. The growth in the CASA ratio indicates the stability and growth potential of customer deposits.

In 1Q24, the loan loss charge (LLC) remained steady at 35 basis points, showing an increase of 4 basis points QoQ but a decrease of 2 basis points YoY. Total provisions increased by 26.1% QoQ and 13.0% YoY.Additionally, the Group's Gross Impaired Loan (GIL) ratio improved to 2.6%, and loan loss coverage improved to 101.0% as at 1Q24.The higher allowance coverage, in tandem with the GIL improvement, is significantly higher than pre-pandemic levels, providing greater stability and resiliency going forward.

In Q1 2024, the company's EPS reached 0.182 MYR, the highest level in the past two years.

Looking ahead, CIMB’s gross loan growth is projected to maintain a high-single-digit rate in 2024, driven by government infrastructure projects and strong non-retail loan growth. Easing lending and deposit competition should stabilize the net interest margin (NIM), supported by strengthened CASA deposits and anticipated rate hikes in Indonesia. Growth in Islamic banking and improved performance in wealth management and investment banking are also anticipated.

Improved CASA deposits and easing competition are expected to boost net interest income growth. The focus on less-risky loans will help contain asset quality risks as repayment assistance programs expire. Despite technology investments and cost inflation, the cost-to-income ratio is expected to stabilize around 47% in 2024 due to effective expense management.

The company's current trailing twelve months (TTM) dividend yield is 5.19%, which is relatively high. Historically, the company has maintained a stable dividend payout, demonstrating a strong commitment to rewarding its shareholders.

In summary, the company's stock price has surged since the beginning of 2024, driven by strong fundamentals and consistent, substantial shareholder returns, which together enhance its investment value. If the company's performance continues at this pace throughout the year, it is expected to further boost the stock price.

In 2024, Malaysia's economy is expected to benefit from stronger external demand, manufacturing activities, and resilient domestic demand driven by increased consumer and investment spending.