KUALA LUMPUR, Aug 16 — CIMB Group is expected to post positive earnings in the coming period despite facing with interest rate cuts and challenging external environment.
Multiple research notes suggested that net interest income (NII) has posted a positive growth of 5.7 per cent year-on-year (y-o-y), contributed by the strong NII growth in the second quarter of the financial year 2019 (Q2 FY19) with 10.9 per cent y-o-y expansion.
Public Investment Bank in its equity notes today said the improved H1 FY19 operating income was underpinned by margin expansion as asset quality held steady.
“Cumulative H1 FY19 net profit is 11.8 per cent higher y-o-y. We see this encouraging H1 momentum carrying into the remainder of the year, particularly for its consumer and SME business segments.
It added that CIMB Niaga is expected to play a significant role in the group’s Forward 23 growth strategy.
“With steady operational improvements also seen group-wide, we are optimistic over longer-term prospects and see scope for further earnings upside and continue to outperform,” it said.
According to AmInvestment, Bank Indonesia (BI) could further lower its interest rate following the strong possibility of another rate cut by the US Federal Reserve, as well as the recent rate reductions implemented by the central banks of India, Thailand, New Zealand and the Philippines.
The investment body said any decline in benchmark interest rates by BI would have a neutral impact on CIMB Niaga as deposits in Indonesia are repriced at a faster rate compared with the longer lagged reprising period of deposits in Malaysia.
“Niaga’s loan grew 2.6 per cent y-o-y driven mainly by growth in mortgage loans, higher outstanding receivables for credit cards and SME loans. The overall loan growth was lower than management’s guidance of a mid-single-digit expansion for FY19,” it said.
Meanwhile, Affin Hwang said that CIMB Group is expected to be on the positive momentum as a whole, with the key drivers for H1 FY19 included a much improved operating income from a better net interest margin and non-interest income.
“For H2 FY19, we maintain our view of a challenging operating environment in Indonesia due to a cautious business sentiment (given global trade tensions) while tight liquidity conditions may put pressure on funding costs,” it said.
As of 11.02am, CIMB share price was flat at RM5.05 with 1.54 million shares traded. — Bernama