KUALA LUMPUR (Oct 1): CIMB Group Holdings Bhd (KL:CIMB) could potentially raise its RM2 billion capital return commitment to increase the chances of its share buyback programme garnering investor acceptance, according to MBSB Research.
A higher capital-return commitment could help offset potential disappointment among investors who are expecting a larger portion of the RM2 billion to be returned via special dividends, the research house said.
“To increase its chances of success, we think there is a likelihood of CIMB positively revising to the RM2.0 billion figure, and that CIMB is confident enough on its ability to garner sufficient capital before signalling to the market via share buybacks,” MBSB Research said in a note on Thursday.
“We would not put it past CIMB’s management to pull off such a manoeuvre — they’ve surprised us positively multiple times in the past,” it added.
MBSB Research noted that share buybacks have historically not been successful in Malaysia. CIMB’s share buybacks make up a portion of its RM2 billion capital return scheme, of which RM700 million has already been returned via special dividends.
The primary purpose of the share buybacks is for CIMB to further drive its earnings per share, return on equity (ROE) and dividend per share figures, MBSB Research noted, particularly as the bank is slightly behind on its ROE target for the financial year ending Dec 31, 2026 (FY2026).
The research house noted CIMB has been buying back shares every day, tallying up to 20.76 million shares for RM163 million since Sept 21 thus far.
Who could follow CIMB?
CIMB’s share buyback programme is also being watched for its potential implications on other banks, according to MBSB Research.
The research house described the programme as the first major share buyback scheme by a Malaysian bank for capital management purposes in many years, and said a successful outcome could encourage other large banks to consider similar measures.
Public Bank, it noted, has already received shareholder approval for a share buyback of up to 10% of its shares, although it has not done any yet. Its management has maintained that this is a capital optimisation option rather than a set path they want to go down, the research house added.
RHB Bank, meanwhile, has high capital ratios and historically releases excess capital via larger payouts in the fourth quarter, MBSB Research noted. It is currently preparing a new capital release plan, which is scheduled to be announced by the first quarter of FY2027, the research house added.
MBSB Research maintained its “buy” call on CIMB but with a lower target price of RM9.20 from RM9.29, based on an unchanged FY2027 forecast price-to-book value of 1.33 times.
At the time of writing, shares of CIMB were down three sen or 0.39% at RM7.76, valuing the lender at RM84 billion.