KUALA LUMPUR (March 6): CIMB Group Holdings Bhd (KL:CIMB) will need to focus on increasing low-cost deposits and generating capital-light income from non-interest sources in the first half of its six-year plan to reach its 12%-13% return on equity (ROE) target by 2027.

Its ROE stood at 11.2% in 2024.

RHB Research in a note said CIMB's ROE target of 12%-13% for 2027 appears to be principally driven by higher profitability, given that it targets a 14%-15% common equity Tier 1 capital ratio, or cash and stock holdings, and 55% dividend payout during the period.

The house said the key drivers expected to lift the ROE are cash and cross-sell, particularly through wholesale, wealth, commercial, and transaction banking.

Indonesia is expected to be a major driver, expectedly so given the increased capital allocation there.

RHB said drilling deeper into the financial metrics underpinning the ROE target, it appears to be a combination of broad based drivers, including lower funding cost, improved contribution from capital-light, client franchise income, better cost efficiency, and some capital management.

Having met most of the Forward23+ targets that ran until 2024, which aimed to reshape the group's portfolio, CIMB on Wednesday unveiled its new corporate strategy that outlines key areas for growth, while positioning the group to remain agile amid a more volatile operating landscape.

It identified 4Cs as its key strategic moves: capital and resources — investing in high-ROE businesses and capital management; cash — low cost deposit gathering; cross-sell — generating capital-light income from non-interest income; and capabilities — cost efficiencies from technology.

The moves aim to, among others, raise the group's ROE to the top quartile among regional peers, and lift its current account, savings account (Casa) ratio to 45% by 2030.

Hong Leong Investment Bank (HLIB), meanwhile, acknowledged that CIMB's strategies are similar to its rivals, but believes execution is key.

The bank said that in this instance, CIMB had proven its ability to deliver results over the past four years.

“Additionally, CIMB still has several levers to achieve its shorter-term ROE target of 12%-13% by 2027. The recent share price pullback is seen as a buying opportunity, with the stock's risk-reward profile now more attractive at current levels,” HLIB said in a separate note.

CIMB’s share price was down 2.44% earlier to RM7.61, giving the group a market capitalisation of RM81.67 billion. Year to date, the stock is down 6.4%.

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