Loan growth of 7% for CIMB
PETALING JAYA: One of the factors that investors look out for when it comes to banking stocks is the net interest margins (NIMs).

For CIMB Group Holdings Bhd, its management has guided that NIMs are improving quarter-on-quarter (q-o-q), led by Malaysia and Indonesia on the back of lower deposit cost and loan repricing in the latter.

Domestically, the consumer and small and medium enterprise (SME) segments will continue to support growth, although CIMB said it was willing to concede some market share in mortgages and the wholesale segment, as margins there are too fine, said RHB Research.

The research house said the initiatives would be positive for NIMs, albeit partly offset by the weaker NIM seen in Singapore and Thailand.

“Post its pre-closed period meeting, we think CIMB’s upcoming result for the first quarter of financial year 2024 (1Q24) could see decent sequential bottom line growth.

“Recall that its key focus for this year – NIM recovery and initiatives to lower deposit cost are filtering through.

“Non-interest income also had a decent quarter,” said RHB in a note to clients.

On the retail front, fees from wealth management and bancassurance had also been positive, it added.

According to the research house, the banking group is retaining its 5% to 7% loan growth guidance.

“Malaysia, Indonesia and Singapore will continue to drive capital generation and its 55% dividend payout guidance should be sustainable.

“Opportunities for capital management will likely be in the form of special dividends, similar to 2023,” said RHB Research.

Meanwhile, UOB Kay Hian (UOBKH) Research said the bank’s asset quality is stable.

“Management indicated that the overall group gross impaired loan ratio and delinquency rates remain stable.

“Overall retail and corporate loans portfolio saw an improvement in delinquency rates while SME loans experienced a slight uptick.”

But this is likely due to seasonal factors like the Chinese New Year and Hari Raya festive periods.

Nonetheless, SME loans constitute a relatively small portion of the group’s total loan composition at 12%, said UOBKH Research.

CIMB has also maintained its group net credit cost guidance of 30 basis points (bps) to 40 bps for 2024 considering the continued improvement in delinquency rates q-o-q,

The research house said it anticipates that the net credit cost for 1Q24 will likely fall towards the lower range of management’s full-year guidance of 30 bps to 40 bps, comparable to or even better than the 31 bps recorded in 4Q23.

Besides loan growth of 5% to 7%, CIMB’s key 2024 targets are return on equity (ROE) of 11% to 11.5%; cost-to-income ratio of below 46.9%, and NIM to come in stable to five bps.

It notes that in 2023, the group loans growth of about 8% had surpassed management’s guidance of 5% to 6%.

“The company has also successfully raised its ROE from the pre-pandemic level of 8% to 9% to the current 10.7%.

“Our 2024 ROE assumption of 11.2% lies midway between management’s target,” said the research house.
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One of the factors that investors look out for when it comes to banking stocks is the net interest margins (NIMs).