UOB Kay Hian
Date of Report: 3 June 2025

CIMB Group 1Q25 Results: Resilient Performance Amidst Regional Macro Headwinds

Overview: A Cautious Yet Steady Start to 2025

CIMB Group Holdings Berhad, Malaysia’s largest investment bank and the country’s second-largest consumer bank, reported its first quarter 2025 results, reflecting a stable yet cautious outlook. The group managed to deliver results in line with expectations, driven by lower provisions, although pre-provision profit saw a year-on-year decline. UOB Kay Hian maintains a HOLD recommendation, with a target price of RM7.70 and an 11.1% upside potential.
Key highlights include fair valuations at 1.03x 2025F P/B—broadly in line with historical averages—and a solid 5.8% dividend yield. However, persistent macroeconomic pressures, foreign exchange volatility, and muted earnings growth cap the upside potential.

Key Stock Data and Performance

• Share Price: RM6.93
• Target Price: RM7.70
• Upside: 11.1%
• Market Cap: RM74.5 billion (US\$17.6 billion)
• Shares Issued: 10,750.2 million
• Major Shareholders: Khazanah Nasional (21.5%), EPF (16.5%), Amanah Saham Nasional (9.9%)
• 52-week high/low: RM8.50 / RM6.21
• FY24 NAV/Share: RM6.80
• FY24 CAR Tier-1: 15.30%

1Q25 Financial Results: In-Line, But Growth Remains Muted

• Net Profit: RM1,973.4 million (+2.2% yoy, +9.9% qoq), representing about 25% of full-year estimates
• Earnings Growth: Supported mainly by a 29% yoy drop in provisions
• Pre-Provision Operating Profit: Down 5% yoy, pressured by net interest margin (NIM) compression and softer non-interest income
• Total Revenue: Down 2.2% yoy (but up 1.5% on a constant currency basis), reflecting forex impacts
• Quarter-on-Quarter (qoq): 9.9% earnings growth driven by better non-interest income, operating cost discipline, and lower provisions

Net Interest Income and NIM Trends

• Net Interest Income: Slight rise of 0.7% yoy and 0.1% qoq, tempered by forex translation effects and ongoing NIM compression
• NIM: Fell 3bps yoy to 2.16%, flat sequentially
• Regional NIM Dynamics:
  • Malaysia: +2bps qoq to 1.79% (aided by lower-cost funding)
  • Indonesia: +11bps qoq to 3.99%
  • Singapore: -12bps qoq to 1.29% (continued margin pressure from lower SORA rates)

Non-Interest Income: A Mixed Bag

• Quarterly Rebound: Non-interest income surged 11.1% qoq, led by:
• Fee and commission income: +12.6% qoq
• Treasury and forex income: +17.2% qoq
• Strong performance from Singapore Wealth, Indonesia, and bancassurance
• Year-on-Year Decline: Down 8.5% yoy due to lower gains from NPL sales at CIMB Niaga and less proprietary trading income

Loan and Deposit Growth: Modest Expansion Amid FX Headwinds

• Group Loans: +1.8% yoy, or +4.4% on a constant currency basis
• Growth Segments:
  • Commercial loans: +5.0%
  • Consumer loans: +2.9%
  • Corporate loans: -2.0%
• Regional Breakdown (constant currency):
  • Singapore: +12.6%
  • Indonesia: +8.7%
  • Malaysia: +2.9%
  • Thailand: -0.5%
• Management Guidance: Maintains 2025 loan growth outlook at 5-7%
• Deposit Growth: Flat yoy, +2.9% qoq

Operating Expenses and Cost Discipline

• Expenses: Down 1.7% qoq, up 1.1% yoy (mainly from technology and marketing investments)
• Personnel Costs: Flat, anchoring overall expense growth
• Cost-to-Income Ratio (CIR): Increased by 160bps yoy to 46.9%, reflecting weak revenue trends and NIM compression

Asset Quality, Provisions, and Capital Strength

• Provisions: Down 28.7% yoy and 27.8% qoq. Net credit charge-off improved to 26bps (1Q24: 35bps, 4Q24: 28bps)
• Management Overlay: RM100 million added in 1Q25 to buffer against macro uncertainties
• Loan-Loss Coverage: Eased to 102.4% (4Q24: 105.3%)
• Gross Impaired Loan (GIL) Ratio: 2.2% (1Q24: 2.6%, 4Q24: 2.1%)
• Credit Cost Guidance: Lowered to 25–35bps (from 30-40bps); UOB Kay Hian maintains a cautious 35bps assumption
• Limited US Tariff Impact: Trade financing <3% of loans; US export exposure <0.4% of customer base
• Capital Adequacy: CET1 ratio at 14.7% (up from 14.6% in 4Q24); 2025 payout assumed at 55%, implying a 5.8% yield

Outlook and Management Guidance for 2025

• Return on Equity (ROE): 11.0-11.5%
• Loan Growth: 5-7%
• Net Credit Cost: 25-35bp (lowered from previous 30-40bp)
• NIM: Stable to -5bp
• Dividend Yield: 5.8% expected; no special dividends assumed
• Muted Earnings Growth: Earnings growth likely capped at 3%, constrained by NIM compression and macro headwinds

Financial Highlights Table

Key Assumptions for 2025-2027

• Loan Growth: 5.0% (2025), 5.2% (2026), 5.5% (2027)
• Credit Cost: 35bp (2025), 32bp (2026), 30bp (2027)
• ROE: 11.1% (2025), 11.2% (2026, 2027)

Environmental, Social, and Governance (ESG) Initiatives

• Environmental:
  • Commitment to provide RM30 billion in sustainable financing by 2040
  • Zero new coal financing and aim for zero carbon emissions across all stakeholders by 2050
• Social:
  • 30% female directors on the Board and upper management
  • Enhanced financial inclusion for B40 and vulnerable communities, including affordable housing and welfare assistance
• Governance:
  • Independent Non-Executive Directors (INED) composition at 60%

Summary and Investment View

CIMB Group’s 1Q25 results reaffirm its resilience in a challenging macroeconomic landscape, underpinned by disciplined cost control, improved asset quality, and robust capital buffers. While the group offers a compelling dividend yield and maintains healthy capital adequacy, the outlook remains tempered by muted revenue growth, persistent NIM pressure, and regional currency risks.
The risk-reward profile is balanced: an attractive dividend and fair valuation offset by limited earnings upside in the near term. Investors seeking stable income and defensive positioning in the financial sector may find CIMB Group an appealing hold, while those prioritizing growth may prefer to await clearer signs of margin recovery and accelerated loan expansion.