KUALA LUMPUR (Nov 7): CIMB Group Holdings Bhd (KL:CIMB) could post decent earnings growth for the third quarter which could help it achieve its return on equity (ROE) target of 11%-15% this year, despite the slower 4Q expected ahead, analysts said.

This is as the group’s net interest margin (NIM) could pick up for the third consecutive quarter amid growth in Malaysia and Singapore thanks to better liability management initiatives — which could offset stressed NIM performance in Indonesia, the analysts said.

However, sustaining such margins in 4Q2024 is likely to be more challenging, amid seasonal headwinds namely competition for fixed deposit, they said. The bank will release its financial result on its third quarter ended Sept 30, 2024 (3QFY2024) on Nov 28.

“We maintain our forecasts, and our FY2024 ROE forecast of 11.1% is at the lower end of management’s 11%-11.5% target,” Maybank IB said in a note.

“Expectations since 2Q2024 have been for loan growth (which was 4.2% year-on-year at end-June 2024) to trail management’s target of 5%-7%, but this has been a conscious move to focus on higher yielding assets, in order to preserve margins,” it said.

Separately, RHB Research pointed to CIMB’s statement that deposit rates had ticked up by 5-10 basis points in 4Q2024 (in line with 4Q2023), and these levels are expected to hold through to next year’s Lunar New Year festivities.

“Sequentially, we expect it to book flattish-to-slight Patmi (profit after tax and minority interests) growth, depending on how loan and other impairments pan out,” it said.

Other headwinds include asset repricing in Singapore and seasonal expenses, RHB said.

On ROE expectations, Kenanga Research said the bank’s return to double-digit ROE “could be indicative of its prospects while offering attractive dividend yields (around 6%) in the medium term”.

“However, CIMB Thailand’s consumer finance business continues to struggle with credit risks as it realigns its growth objectives for better asset quality.

“Still, we are less concerned by the unit’s performance given its <5% contribution to group-level PBT (profit before tax).

“That said, its current share price indicates that it had already fully priced in FY2024 ROE [estimate] of 11.5%, which we have applied in our valuation, and we will assess its 2025 strategies as it is unveiled,” it said.

According to RHB Research, CIMB’s next mid-term plan is expected to be unveiled in 1Q2025, where a higher ROE target “will be a key rerating catalyst” and supportive of further multiple expansion.

All three research houses have maintained their target prices on the stock, with Maybank IB’s ‘buy’ call at RM9.20 and RHB’s ‘buy’ call at RM9.25, while Kenanga had a ‘market perform’ call at RM7.60.

CIMB posted net profit growth of 14% to RM3.9 billion for 1HFY2024, from RM3.42 billion an year ago, as operating income rose to RM11.23 billion, from RM10.33 billion.

At 2.34pm, CIMB shares were up five sen or 0.61% at RM8.25, giving the group a market capitalisation of RM88.44 billion.