CIMB cost ratio enhanced with purchase of Jupiter Securities

  • Banking
  • Friday, 08 Sep 2017

Companies like CIMB Group Holdings Bhd, Hong Leong Financial Group Bhd (HLFG) and AmBank Group Bhd may have to beef up their capital structures by 2019.

PETALING JAYA: Following the proposed acquisition of Jupiter Securities and the eventual stake sale of CIMB Securities International (CSI), CIMB Group’s overall cost-to-income ratio is due to be enhanced, but with minimal impact to its earnings, said Maybank Investment Bank (IB) Research.

In a research report yesterday, Maybank IB Research said CIMB’s stockbroking earnings were negligible, with a high cost-to-income ratio.

“While we would expect the disposal of a 50% stake in the entire stockbroking business to improve CIMB Group’s overall cost-to-income ratio, the impact to the group’s bottomline will be immaterial, in our view.

“We maintain our buy call on CIMB and target price of RM7.50, pegging 2018 valuations to a price to book value of 1.3 times,” said Maybank IB Research.

Recall that CIMB Group has proposed to acquire the entire equity interest in a subsidiary of Olympia Industries Bhd, known as Jupiter Securities, for RM55mil in cash.

CIMB’s domestic stockbroking business is currently housed as a unit under CIMB Investment Bank.

The management has indicated that the local stockbroking business will be injected into Jupiter Securities, which holds a stockbroking licence of its own.

This will then facilitate the eventual 50% stake sale in the Malaysian stockbroking business to China Galaxy Securities, completing the joint venture. In June 2017, CIMB announced the sale of a 50% stake in its CSI to China Galaxy Securities for RM515mil. CSI houses CIMB Group’s overseas cash equities businesses outside Malaysia, such as Indonesia, Singapore, Thailand, Hong Kong, India, South Korea, the UK and the US.

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