PETALING JAYA: CIMB Group Holdings Bhd
’s sale of CIMB Thai Bank Public Co Ltd’s (CIMB Thai) automotive financing portfolio to Bank of Ayudhya Public Co Ltd and its subsidiary (Krungsri) removes a persistent credit cost drag.
Hong Leong Investment Bank (HLIB) Research said in a note to clients that CIMB Thai’s restructuring marks a decisive shift from a universal model to a focused, niche operator, prioritising capital efficiency over sheer scale.
“The centrepiece is the disposal of its auto finance portfolio – a subscale unit that incurred 2.8 billion baht (RM340mil) in losses over two years – effectively removing a persistent earnings drag.
“While auto loans comprised only 13% of total loans, they contributed disproportionately to credit costs, occasionally exceeding 100% of total provisions,” it said.
HLIB Research said the transaction was highly accretive, unlocking around RM1.3bil in excess capital via a RM8.5bil risk weighted assets release, allowing the group’s Common Equity Tier 1 to normalise towards a 14% target in financial year ending Dec 31, 2027 (FY27) from 14.6% in FY25.
“Crucially, this surplus capital – alongside enhanced upstreaming capacity from a leaner, more profitable subsidiary – underpins a stronger, more sustainable dividend payout profile for the group.”
The research house added despite the RM200mil in one-off transformation costs, the removal of the auto finance headwind supports a sustainable 10 to 20 basis points (bps) uplift to the group’s target return on equity (ROE) of 12% to 13% in FY27.
A senior banking analyst told StarBiz that this deal was accretive for the lender and shareholders can look forward to improved returns following this exit from a non-core and sub-scale business.
RHB Research, meanwhile, said at the group level, citing CIMB, that 11% to 11.5% FY26 ROE target takes into account the one-off restructuring cost and assumes the portfolio stays consolidated for much of the year.
However, the absence of the one-off restructuring cost next year is expected to lead to a 10 to 20 bps uplift in FY27 ROE, with another 10 to 20 bps coming from CIMB Thai’s ROE improvement.
“Together with other strategic levers, management thinks the group is on track to achieve its 12% to 13% FY27 ROE target,” it added.
It noted that CIMB Thai has been working with the regulator to return capital (from the deal) to CIMB, which CIMB intends to reallocate to ROE-accretive businesses across the group and/or return to shareholders.
“Note that any potential capital return from this would be on top of last year’s announced RM2bil capital return plan to shareholders by 2027,” said RHB Research.
TA Research viewed the divestment positively, as it marks a key milestone in CIMB Thai’s ongoing transformation under the Forward30 strategic plan.
This follows earlier restructuring initiatives under Forward23+, including the exit from CIMB Thai Commercial, as the group proactively de-risked its balance sheet by scaling back exposure to the small medium enterprise segment, a key source of legacy non-performing loan formation.
At last look, the stock was at RM7.93.
