KUALA LUMPUR: CIMB Bank Bhd unveiled its 2024 return on equity (ROE) target of 11.5 to 12.5 per cent alongside key drivers that indicated that the bank management noticed a more resilient franchise, according to RHB Research.
The firm said the key franchise consisted of ID and digital assets which were agnostic to the economic cycle.
RHB Research added that the franchise comes in with better earnings stability that entailed larger provision buffers to shield against credit cost spikes, giving CIMB increased confidence around its target.
The firm maintained a "Buy" call on CIMB as its results for the first quarter of 2023 (1Q23) were in line with the firm's expectations.
This is after CIMB registered a core net profit for 1Q23 of RM1.6 billion, which rose 15 per cent year-on-year (y-o-y) and 24 per cent quarter-on-quarter (q-o-q).
RHB Research said CIMB results had accounted for 26 per cent of its and street forecasts for the earnings of the company in FY23.
"Key positives were robust non-interest income (Non-II), opex discipline and stable asset quality, while net interest margin (NIM) compression was the main negative.
"It is now guiding for a higher NIM compression of 10 to 15 bps, from 5 to 10 bps, but management is confident that there is sufficient Non-II traction and is retaining its FY23 ROE target," it said.
The bank's NIM slipped 31 bps q-o-q and 19 bps y-o-y primarily due to a 30 bps q-o-q compression in Malaysia, while its operations in Singapore, Indonesia and Thailand saw NIM decrease by 10 to 20 bps.
Optimistically, RHB Research said the deposit competition had moderated, and CIMB managed to cut promotional fixed deposit rates without impacting volume adversely in April and May, which did not take May's overnight policy rate hike into account.
As for gross loan, the firm said CIMB had expanded it by 7.0 per cent y-o-y on the back of Indonesia which increased by 10 per cent y-o-y and Thailand, which rose by 14 per cent y-o-y.
Total deposits for CIMB increased by 6.0 per cent y-o-y led by fixed deposits while current account savings account (CASA) dropped by 8.0 per cent y-o-y.
"As such, group CASA ratio at the end of March eased to 37.9 per cent from 39.9 per cent in December 2022," RHB said.