KUALA LUMPUR (July 28): CIMB Group Holdings Bhd (KL:CIMB), the second-largest bank by assets, may see its loan growth moderate this year, dragged by weaker business lending as clients remain cautious amid ongoing tariff developments and currency headwinds, said UOB Kay Hian.

On a constant currency basis, CIMB’s group loan growth is tracking at around 4%, falling short of management’s 5%–7% target. However, reported group loan growth is even softer at approximately 2%, dampened by the strengthening of the ringgit.

“Management indicated that channel checks with clients suggest business sentiment remains cautious in the aftermath of Liberation Day, with many adopting a wait-and-see approach, reinforcing a more guarded lending stance. The new business loans pipeline remains weak post-Liberation Day,” it said in a note to clients. 

“We are revising our loan growth assumption downwards from 5% to 2%, to reflect weaker business lending and currency impact”. 

While CIMB’s management has maintained its 2025 net interest margin (NIM) guidance at a five-basis point (bp) compression — assuming only one 25bp overnight policy rate (OPR) cut, UOB is forecasting a slightly steeper three-bp compression, anticipating two OPR cuts this year. 

Sensitivity-wise, each 25bp rate cut is estimated to compress group NIM by approximately two-bp annually, said UOB. 

As such, UOB revised its earnings forecasts for 2025 to 2027 lower by 1%–2%, and trimmed its target price for the stock to RM7.52 from RM7.70.

“We see a balanced risk-reward profile, with modest growth offset by an appealing 5.5% dividend yield. Additionally, CIMB’s relatively high foreign shareholding of 33.8% versus the five-year average of 28% could limit share price upside, if macro uncertainties persist amid ongoing tariff negotiations,” said UOB, which maintained its “hold” call on the stock. 

Shares of CIMB have fallen more than 16% year-to-date, weighed down by concerns over slower economic growth and potential recession risks. Despite this, most analysts remain positive on the stock, due to the bank’s limited direct exposure to tariffs. 

Trade-related loans account for less than 5% of group loans, while clients with US export exposure make up only 3%–5%.

According to Bloomberg data, 17 analysts have a “buy” call on CIMB, while three rate it a “hold”, with a 12-month consensus target price of RM8.25.