KUALA LUMPUR (March 3): CIMB Group Holdings Bhd (KL:CIMB) is expected to grow its net profit further this year after a record 2024, as continued expansion in loans help to cushion a decline in lending margins, analysts said.

The consensus now expects the second-largest Malaysian bank’s net profit to break above RM8 billion this year, and a majority of analysts kept their ‘buy’ call on the stock. Shares of CIMB Group rebounded on Monday, rising over 3%, after the group declared its highest dividend payment.

“Going forward, we are cautiously optimistic”, while Asean, the home market of CIMB Group, is likely to stay resilient, said MIDF Amanah Investment Bank in a note. Healthier loan growth will offset pressure on its net interest margin, while “cost discipline” will provide support as asset quality improves, the house said.

Shares of CIMB Group fell 5% last Friday, amid a sharp downturn in Asian currencies and stock markets roiled by escalating trade tensions between the US and its major trading partners. The sharp decline erased meagre gains in CIMB Group’s shares, before the results were announced.

The company also sounded out caution on net interest margin pressures, because of declining interest rates in CIMB Group's key markets of Indonesia and Thailand.

“We opine the regional landscape is likely pressured with differences in monetary policy stance to tackle the respective economic landscapes, with consumers and the business environment following suit,” said Kenanga Investment Bank, which maintained the stock on a ‘market perform’ call.

“Malaysia remains as the anchor with its leading presence and greater handle of margins, whereas CIMB Niaga in Indonesia juggles with declining asset yields and higher funding costs,” the house noted.  

Post results, there are 16 ‘buy’ calls on CIMB Group, far outnumbering the five ‘hold’ recommendations. There are no ‘sell’ ratings. The average target price is now RM8.86, according to Bloomberg, suggesting a 10% return in the next 12 month from the current price.

For Public Investment Bank, the potential for higher dividends is “encouraging”, given that an expansion in the return on equity gives CIMB Group room to further “optimise its capital structure”. The house upgraded its call on CIMB Group to ‘trading buy’, following the stock’s recent decline.

At around 6%, the dividend yield is “enticing”, as CIMB Group’s capital management initiative could lead to an increase in its dividend payout ratio in the next few years, CGS International added.

On its part, CIMB Group is targeting a return on equity of 11% to 11.5% in 2025, with a dividend payout target of 55%. Net profit grew nearly 5% year-on-year to RM1.8 billion in the fourth quarter ended Dec 31, 2024 (4QFY2024), lifting its annual net profit to a record high of RM7.73 billion for FY2024.

A second interim dividend of 20 sen was also declared, bringing the total annual dividends declared for the full year to a record high of 47 sen per share.

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