KUALA LUMPUR: CIMB Group Holdings Bhd is poised to chart growth in Singapore as the bank's pivot to be a niche challenger bank is bearing fruit, according to analysts.
CIMB held its investor day recently, showcasing its Singapore operations. Notably, its pivot to focus on returns has led to its Singapore operations achieving its Forward 23+ (F23+) target a year ahead of plan.
RHB Investment Bank Bhd (RHB Research) said the bank's adoption of a niche challenger banking model is supported by five strategic themes, which include optimising its deposit structure, reshaping the portfolio towards segments with higher returns, and improving cost efficiency.
"CIMB's deposit strategy involves diversifying its deposit base (SMEs and financial institutions have proven to be a cheap source of funding) and to leverage off its digital offerings to drive current account saving account (CASA) growth (2019-2023 CAGR of 20 per cent versus deposit CAGR of 11 per cent).
"As such, its CASA ratio rose to 48.7 per cent in the first half of 2024 (1H24) versus 37.7 per cent at end-2019, while the rise in cost of deposits (1H24 vs 2019) has not been as steep as that of benchmark rates.
"Consequently, 1H24 net interest margin (NIM) expanded to 1.41 per cent versus 1.34 per cent in financial year 2019, and this was achieved notwithstanding a lower loan-to-deposit ratio (LDR) of 67.8 per cent (2019: 88.8 per cent)," it said in a note.
Hong Investment Bank Bhd (HLIB Research) said although CIMB is a Tier 2 bank in Singapore, it likes the fact that CIMB is adopting a niche challenger banking model and is playing in the areas that they have a competitive advantage to win.
It noted that the bank has identified three levers to help propel the CIMB Singapore franchise to greater heights, which include strong ASEAN presence enabling it to capture regional flow, strong competitive advantage within its key focus areas, and delivery of better customer experiences and cost efficiencies.
"For consumer banking, CIMB is looking to tap on the fast-growing bancassurance space and leverage on its seven insurance partnerships; it now commands a six per cent market share, making it the fourth largest player in Singapore.
"Separately, it intends to make more headway in the Singapore-Malaysia corridor by courting the 1.4 million Malaysians working there (so far only offering competitive forex rates and basic banking services)," it said.
RHB Research maintained "Buy" on the stock with a target price of 9.25, while HLIB Research retained its "Hold" stance with a target price of RM8.40.