PETALING JAYA: RHB Research believes CIMB Group Holdings Bhd
’s overseas operations, chiefly in Indonesia and Thailand, stand to benefit from the upcoming rate cut cycle.
“We think the regional rate cuts could be positive for CIMB’s overseas operations,” the research house opined in its “Economics & Market Strategy” report.
The research house noted a rate cut cycle is currently underway. The strategy report revised its views on the Federal Funds Rate (FFR) and now expected the Federal Reserve (Fed) to cut the FFR by 100 basis points (bps) in 2024, and a further 100 bps in 2025.
It also anticipated Bank Indonesia (BI) to cut the policy rate by 75 bps and 100 bps in 2024 and 2025 respectively, while Bank of Thailand (BoT) is expected to lower its policy rate by 25 bps this year and 75 bps next year.
“Bank CIMB Niaga could be a beneficiary. In our view, Indonesian banks generally stand to benefit from BI’s rate cut cycle,” RHB Research said.
As for Thai banks, the research house said the uneven macroeconomic recovery this year has been a challenge for asset quality.
Thailand contributed 4% to CIMB’s profit before tax in the first half of 2024 (1H24).
Meanwhile in Singapore, RHB Research believes that US FFR cuts will likely pressure net interest margins (NIMs).
However, it reckoned that there will be compensating factors to cushion the NIM pressure as long as the global economy does not slip into a recession.
RHB Research, which has upgraded the stock to a “buy” with a target price of RM8.90 a share, said loan growth could pick up in the near term in the domestic market.
“The 1H24 annualised growth in Malaysia was 2% versus management’s 5% target, suggesting a stronger 2H24,” it added.
