KUALA LUMPUR: RHB Research has increased its forecast on profit after tax and minority interest (PATMI) for CIMB Group Holdings Bhd for the fiscal years 2024 and 2025 (FY24 and FY25) by 9 per cent to 10 per cent after the company's financial results exceeded predictions.
This upward revision was driven in part by an additional special dividend per share of 7 sen.
CIMB disclosed a net profit of RM1.7 billion, marking a modest 7 per cent decrease quarter-on-quarter (QoQ) but a significant 29 per cent increase year-on-year (YoY), contributing to its fiscal year 2023 (FY23) earnings reaching RM7 billion, reflecting a noteworthy 28 per cent YoY increase, surpassing both consensus FY23 PATMI estimates according to RHB Research.
"Despite anticipation of weaker bottom-line performance QoQ, non-interest income (NOII) was stronger than expected, and credit costs were lower than anticipated due to favourable asset quality," it added.
RHB Research said CIMB's net interest margin (NIM) decreased by 15 basis points QoQ due to deposit competition in Malaysia and Indonesia, although there was expansion in Singapore.
"However, strong NOII from consumers and wholesale fees partially offset this.
"Loan and deposit expansion remained strong, increasing by 2 per cent QoQ or 8 per YoY. Loan growth was broad-based, and deposits witnessed a 7 per cent QoQ or 11 per cent YoY rise in Current Account Savings Account (CASA), credited to previous initiatives driving robust wholesale CASA performance," it noted.
On the outlook, CIMB anticipates a return on equity (ROE) for 2024 in the range of 11 per cent to 11.5 per cent, slightly below its Forward23+ ambition target of 11.5 per cent to 12.5 per cent.
"Factors affecting this include NIM and capital utilisation, with a focus on managing funding costs to potentially achieve slight NIM expansion.
"Despite healthy loan demand, CIMB aims to prioritise NIM preservation over volume, projecting a loan growth of 5 per cent to 7 per cent for 2024, particularly in Malaysia and Indonesia," said RHB Research.
Additionally, it plans to sustain a 55 per cent dividend payout ratio but remains open to reviewing this strategy to optimise capital further if opportunities arise.
RHB Research has upheld its recommendation to 'Buy' CIMB shares and increased its target price to RM7.35, up from RM6.88.