Maybank and CIMB recently held investor days to highlight their strategic initiatives and performance in Singapore, reflecting a shared optimism about the growth opportunities in this pivotal regional market. Both banks are strategically positioned to leverage the increasing demand for cross-border payments, trade flows, and wealth management services along the Malaysia-Singapore (MYSG) corridor. Maybank SG is focused on capturing cross-border consumer spending while catering to both onshore and offshore wealth clients from Malaysia and Singapore. In contrast, CIMB SG is targeting high-net-worth individuals (HNWIs) from Indonesia and other ASEAN markets, effectively capitalising on the region's expanding wealth base.

Emerging from the pandemic, both banks have fortified their financial positions, bolstered by improved asset quality and profitability. CIMB SG has demonstrated impressive deposit growth and has expanded businesses with higher returns. Meanwhile, Maybank SG benefits from a diverse income stream and maintains a strong leadership position in auto financing. With Singapore gaining prominence in both banks' strategic plans, their emphasis on growth through cross-border activities, wealth management, and sustainable financing is anticipated to drive longterm value. As the MYSG corridor continues to expand, Maybank and CIMB are well-positioned to capitalise on regional opportunities.

Strategic Positioning and Operational Enhancements

Maybank SG currently ranks among the top five banks in the region, boasting total assets of S$80.97bn, trailing DBS, UOB, OCBC, and Standard Chartered. The bank has a solid physical presence, featuring 18 branches (including ATMs), 4 Premier Wealth Centres, and 1 Private Wealth Lounge. In contrast, CIMB SG operates from a single flagship branch but prioritises technology investments, digital platforms, and advanced analytics to enhance customer engagement and operational efficiency. This leaner approach aligns with a strategy that delivers superior digital experiences and value-added services, allowing CIMB to scale and adapt to evolving customer preferences.

Repositioning CIMB SG as An ASEAN-Focused Bank

During the investor briefing, CIMB management emphasised Singapore's importance as a key market, recognising the city-state as ASEAN's global financial gateway. Operating across six business units, CIMB SG offers a comprehensive range of financial products and services tailored to consumer, commercial, and wholesale banking clients. It plays a crucial role in the execution of the group's Forward23+ strategy, aimed at repositioning CIMB as a leading ASEAN-focused bank. Singapore's contributions have been integral to the group's turnaround, supporting efforts to enhance profitability and growth across core markets. Furthermore, CIMB has strategically enhanced its presence in the ASEAN wholesale, preferred, and commercial banking markets by improving customer experience and service quality while leveraging the group's regional footprint for cross-border synergies.

Focus on High-Growth Segments and Cost Efficiency

CIMB has undergone a significant transformation by shifting from a scale-driven growth model (2009-2019) to a return-focused strategy, prioritising high-return segments such as Wealth, SME, and Treasury. The bank has successfully restructured its underperforming Corporate, Commercial, Transaction Banking, and Consumer segments while optimising its deposit structure by increasing CASA deposits, thereby reducing funding costs. This reallocation of resources towards higher-return businesses with more than 20% Revenue & Risk-Adjusted Return on Capital (RAROC) has led to an increase in the consumer asset mix from 27% in 2019 to 33% in June 2024.

CIMB SG's commitment to cost efficiency has yielded impressive results, post a restructuring exercise in 2021-2022 costing RM66mn. Initiatives such as automation, digitalisation, and regionalisation of back-office functions—including the relocation of contact centre operations to CIMB’s headquarters in Malaysia—have improved the cost-to-income (CTI) ratio from 56.6% in 2019 to 43.1% in the 1H of 2024. Looking ahead, CIMB SG plans to accelerate AI-driven automation and develop ecosystem partnerships between 2025 and 2030 to introduce innovative digital products and embedded financial services. The bank has also strengthened its risk management framework, pivoting towards secured SME lending while exiting high-risk sectors such as Oil & Gas and structured trade finance. Enhanced cybersecurity and business continuity capabilities have further ensured operational resilience through cloud adoption, technology upgrades, and rigorous risk management frameworks.

Maybank's Diverse Offerings and Strategic Growth Initiatives

Maybank offers a comprehensive suite of banking solutions catering to both consumer segments and global banking clients, distinguishing itself through its focus on Islamic Banking and ValueBased Banking. The bank positions itself as a provider of tailored Halal Economy value chain solutions for businesses and strives to be a thought leader in ethical banking, offering clients an extensive range of Shariah-compliant products. In the consumer banking sector, Maybank SG has achieved market leadership in auto financing, thanks to the establishment of Singapore's first Digital Auto Dealership Ecosystem, extending beyond traditional lending services.

In addition to its strength in auto financing, Maybank is targeting growth in sustainable finance, trade, and supply chain financing, leveraging rising trade flows to enhance client penetration. The bank aspires to solidify its position as the preferred partner for cross-border businesses. It aims to expand its electric vehicle (EV) market share beyond 28% while maintaining its leadership in retail auto financing. Furthermore, Maybank SG intends to deepen its capabilities in Mid-Cap and SME lending and strengthen its Islamic Banking offerings and focus on sustainable financing solutions, such as the Singapore Green Loans.

Financial Performance

Both Maybank SG and CIMB SG have demonstrated steady financial performance, showing strong post-pandemic recovery in income, asset quality, and profitability. Each bank leverages distinct strengths to drive growth, with Maybank SG emphasising consumer and treasury income, while CIMB SG focuses on building deposit strength and reshaping its portfolio towards higher return businesses. Maybank SG's total income has nearly returned to pre-pandemic levels, supported by robust growth in Wealth and Treasury income. For 1H 2024, Consumer Financial Services and Global Banking accounted for 48% and 49% of PBT, respectively, highlighting balanced performance across segments.

CIMB SG has undergone a remarkable turnaround, transforming a loss before tax of S$348mn in 2020—attributable to restructuring and kitchen-sinking efforts—into a PBT of S$290mn in 2023. The bank's loan-to-deposit (LD) ratio fell from 88.8% in 2019 to 67.8% in 1H 2024, driven by a 9.5% CAGR in deposits, increasing from S$14.3bn in 2019 to S$22.6bn in 1H 2024. In comparison, Maybank's deposits grew at a slower 2.7% CAGR during the same period. CIMB's NIM expanded to 1.41% in 1H 2024, up from 0.93% in 2020, benefiting from a rising mix of CASA deposits and higher loan yields amid an elevated interest rate environment. Conversely, Maybank's NIM increased modestly by 17 bps to 0.92%, constrained by a higher reliance on fixed deposits (FD), which constituted 77% of its deposit base compared to CIMB's 51% FD mix. We believe the lower LD ratio of CIMB provides ample room for aggressive loan expansion moving forward.

Both banks have shown remarkable improvements in asset quality, with the gross impaired loans (GIL) ratio for CIMB SG and Maybank SG improving to 0.8% and 0.68% in 1H 2024, respectively, down from 3.9% and 3.3% in 2020. Loan loss coverage ratios have also strengthened, with CIMB SG and Maybank SG’s coverage ratios rising to 159% and 155.5% in 1H 2024, respectively, up from 41% and 62.8% in 2019.

Looking ahead, CIMB SG expects overhead expenses to remain stable, with credit costs normalising to 30-35 bps and a sustainable ROE of 13-15% compared to the elevated 18% in 2023. Maybank SG’s ROE also saw improvement, rising to 11.3% in 1H 2024, up from an average of 7-8% between 2021 and 2023.

Overall, CIMB SG’s PBT contribution to the group has increased to 15% in 1H 2024, up from 7% in 2019, while its share of group loans and deposits has risen by 2% and 4%-points, respectively. The bank is on track to achieve its Forward23+ targets ahead of schedule, contributing to the group’s ROE guidance of 11.0-11.5%. Maybank SG's PBT contribution has also grown, accounting for 25% in 1H 2024, up from 20.7% in 1H 2023. Management remains optimistic for the 2H 2024, anticipating a gradual increase in loan demand amid potential rate cuts, which could stimulate borrowing activity. While NIMs are expected to moderate, funding costs may rise due to heightened liquidity competition. Nevertheless, asset quality is anticipated to remain stable, with no significant stress identified in any particular sector.

Given the recent appreciation of the Malaysian ringgit (MYR), currency fluctuations between the Singapore dollar (SGD) and MYR are key factors to monitor. We estimate that a 10% appreciation of the MYR against the SGD would lead to a 2.5% reduction in Maybank Group’s PBT and a 1.5% reduction in CIMB Group’s PBT.

Strategic Initiatives Beyond 2024

Looking beyond 2024, CIMB SG is positioning itself as a leading ASEAN financial hub by leveraging its strong regional presence and capitalising on cross-border activities, particularly along the MYSG corridor. The bank aims to expand its Preferred and Private Banking segments to attract regional wealth while cross-selling Wholesale Banking products, including treasury solutions and investment banking services. Notably, approximately 40% of CIMB’s Corporate Banking portfolio comprises ASEAN-related clients, underscoring the importance of these flows in driving the group’s growth strategy.

In addition to enhancing its regional footprint, CIMB SG is focused on expanding its high-growth and high-return segments, such as Consumer and Commercial Banking and Non-Bank Financial Institutions (NBFIs), which are vital for maintaining a robust deposit base and CASA franchise. A key priority is increasing its SME lending market share in Singapore from the current 1%. The bank also benefits from bancassurance partnerships with companies like AIA and Tokio Marine, utilising an open architecture platform to offer competitive premium financing solutions and seamless digital applications to its customers. Furthermore, CIMB SG is committed to investing in digital transformation, enhancing in-house capabilities to improve customer experience and operational efficiency, thereby solidifying its long-term growth and competitive positioning within the ASEAN region.

In the next three years, Maybank SG aims to accelerate its wealth management growth by offering holistic products and tailored solutions specifically targeting pre- and post-retiree segments. The bank has already made significant strides, with streamlined onboarding processes leading to S$681mn in net new monies during the 1H of 2024. This momentum supports Maybank's objective to increase the contribution of Global Wealth Management (GWM) to total income from 21% to 26%.

In addition to wealth management, Maybank SG is prioritising sustainable finance, trade, and supply chain financing to leverage rising trade flows for improved client penetration. The bank aims to establish itself as the preferred partner for cross-border businesses while enhancing its presence in the auto finance sector and maintaining its leadership in retail auto financing. Maybank SG also intends to deepen its capabilities in Mid-Cap and SME lending by reinforcing its Islamic Banking offerings and focusing on sustainable financing solutions.

Buy Recommendations Reiterated

We make no changes to our earnings estimates pending upcoming results. We reiterate our BUY calls on CIMB and Maybank. CIMB’s TP is maintained at RM9.48 based on an implied PBV of c. 1.32x based on the Gordon Growth Model and a 3% ESG premium. Maybank’s TP is maintained at RM11.85 based on an implied PBV of c. 1.40x based on the Gordon Growth Model and a 3% ESG premium.

Source: TA Research - 18 Oct 2024