CIMB Group Holdings is a regionally well-diversified company with major operations in Singapore, Malaysia, Indonesia, Thailand, and Cambodia.
With Southeast Asia having emerged as one of the world’s fastest growing regions, the demand for financial services by individuals and companies should be high in the coming years and CIMB is looking to tap into this growth by expanding its presence in this region.
Malaysia’s financial market has been rapidly growing over the past few years. The country has emerged as one of South East Asia’s leading financial centers.
In fact, according to Economic Intelligence Unit’s survey of the world’s most competitive cities in 2012, Kuala Lumpur came in at 45, and was ranked 10th in terms of financial maturity.
Malaysia is also one of the world’s leading Islamic financial centres and CIMB has been expanding its presence and services in the Islamic banking sector.
According to RAM Ratings, the Malaysian Islamic banking’s assets almost doubled in the last five years, expanding to RM423 billion as at end-February 2014 and accounting for 21 percent of the banking system’s assets.
This could make up 25 percent of the Malaysian banking sector by 2017 as it grows increasingly important on the global stage.
Beyond Malaysia, CIMB is actively involved in other ASEAN markets, such as Thailand, Indonesia, and Singapore.
As the developing countries continue to advance and become more financially savvy, banking services, such as checking accounts and mortgages will become more prevalent.
This should lead to increasing business for CIMB bank and other financial services companies operating in the region.
As a major private investment bank, CIMB has also been involved in numerous major deals and is active in the initial public offering (IPO) market.
With Malaysia expected to host at least nine IPOs this year, CIMB could likely see increased businesses in the investment banking sector.
Company Profile
CIMB is the fifth largest bank is Southeast Asia in terms of assets and its network of 1,061 branches is the largest in the region. CIMB has branches in Malaysia, Indonesia, Thailand, Singapore and Cambodia.
CIMB is also Asia’s largest private investment bank outside of Japan and has trading offices in Bahrain, Colombo, Shanghai, Sydney, Taipei, and numerous other financial hubs.
Financial Highlights
CIMB has enjoyed solid growth over the last several years. In FY13 (ending 31 December 2013), the company’s operating income came in at RM14.7 billion, compared with an income of RM13.5 billion in FY12.
Net profits have also been growing at a healthy rate. In FY13, the company brought in RM4.5 billion, versus RM4.3 billion in FY12.
Based on Maybank IR Research’s report, the company’s assets are diversified across investments, loans, and other assets.
In FY13, 9.1 percent of the company’s assets are held in cash and fund, while 18.8 percent was held its investment portfolio and 61.6 percent was held in loans, advances and other forms of financing.
Key Developments
CIMB is seeing mixed deposit growth in Thailand. Large accounts have been growing, but small individual accounts have stagnated due to a weak retail market. Political instability may be causing a slowdown in retail growth .
Brand Finance’s annual ranking found that CIMB as Malaysia’s most valuable banking at US$2 billion and ASEAN’s fourth most valuable brand. CIMB was the only Asian bank outside of Japan to achieve the coveted AAA- rating. Only 18 banks worldwide have achieved a higher rating of “AAA”.
The company used Chinese New Year to install a new core banking system. This system is projected to improve the company’s ability to service customers and help streamline its regional operations. Singapore and Thailand already use the new system, and Indonesia should be on board by the end of 2015 .
CIMB Securities recently announced a partnership with one of Vietnam’s leading brokerage firms, VNDIRECT. The move could be ahead of an eventual expansion of services provided in Vietnam .
Brokers’ Recommendations & Catalysts
The most recent investor outlooks have been trending towards “Hold”. AmResearch has issued a “Hold” on the stock, setting its start price at RM7.02 and its target price at RM7.30. TA Research, however, has issued a “Buy”, setting its target price at RM8.40.
Meanwhile, Public Bank has also issued a “Buy” but is more conservative with its target price, last set at RM8. Interestingly, Maybank Research and Kenanga Research have also set their target price at RM8 but have put a “Hold” on the bank’s stock.
Despite the number of “Hold” calls, it is important to note that most firms are projecting CIMB’s stock values to continue to trend upwards. The difference centers largely around the extent of how much CIMB would grow.
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