KUALA LUMPUR (Jan 31): CIMB Group Holdings Bhd’s results for the fourth quarter ended Dec 31, 2023 (4QFY2023), set to be released on Feb 29, may show a quarter-on-quarter (q-o-q) decline in net profit, partly due to seasonality, but year-on-year (y-o-y) growth is likely to be decent, RHB Research said.

“That said, given its strong 9MFY2023 [nine-month period ended Sept 30], the full-year numbers should meet estimates,” the research house wrote in a note on Wednesday.

For 9MFY2023, CIMB’s net profit grew 27.97% to RM5.27 billion from RM4.11 billion a year earlier while revenue increased by 6.99% to RM15.64 billion from RM14.62 billion.

“More importantly, we are watching out for 2024 guidance, especially if the 2024 ROE [return on equity] target of 11.5%-12.5% is reaffirmed. Our GGM [Gordon Growth Model]-derived TP [target price] assumes a conservative 10% ROE,” said RHB, which had attended CIMB’s briefing recently.

Meanwhile, AmInvestment Bank Bhd opined that CIMB’s net interest margin is likely to be weaker q-o-q in 4QFY2023, attributed to an increase in funding cost.

“On retail deposits, we gather that there were still campaigns ongoing in September and October 2023 even though competition was not as intense as in 4QFY2022. Meanwhile, on non-retail or wholesale deposits, the increase in cost of funds was higher than retail deposits for both September and October 2023,” it said in a separate note.

CIMB’s management alluded to a moderation in deposit competition in 1QFY2024, said AmInvestment. Nevertheless, the research house said it continues to see challenges in the ability to lower cost of funds in the near term.

“Thus far, there has not been any flight of deposits to digital banks. Hence, commencement in digital banking operations of GXBank, Boost and Aeon Bank has not impacted the group’s deposit pricing strategy.

“We continue to like CIMB due to its attractive valuation, trading at 0.9 times FY2024 forecast P/BV [price-to-book value] with a dividend yield of 6.5%. Also, it is seen as a more liquid banking stock that will benefit from foreign fund inflows.

“Asset quality of the group has improved with lower provisions while diversification of its revenue and portfolio reshaping initiatives have contributed to a stronger core ROE. Optimisation of credit cost, capital and lower losses from digital assets invested are envisaged to uplift its earnings ahead,” AmInvestment added.

RHB and AmInvestment both maintained their 'buy' recommendations for CIMB and kept their TPs for the stock at RM6.88 and RM6.90, respectively.

On the other hand, Kenanga Investment Bank Bhd said it is optimistic on CIMB’s future prospects based on the expectation of the bank’s return to double-digit ROE, better forward earnings growth (21% versus industry average of 8%) and attractive dividend yields of about 6% it offers to investors in the medium term.

“That said, we believe its merits could have been fairly priced following the reemergence of foreign shareholders into Malaysian equities, stabilising CIMB’s risk-to-reward. Hence, we downgrade our call to ‘market perform’ from ‘outperform’,” said Kenanga, which maintained its TP for the bank at RM6.30.

CIMB currently has 16 ‘buy’ and three ‘hold’ calls, with a consensus rating of RM4.68, according to Bloomberg.

CIMB’s share price touched a record high of RM6.27 in Wednesday’s morning session. At the time of writing, the counter trimmed its gains to trade at RM6.22, giving it a market value of RM66.44 billion, with some 4.31 million shares changed hands.