A banking analyst tells The Edge that while CIMB’s transformation journey over the last 2 1⁄2 years has been “impressive”, its ROE target seems ambitious given the external headwinds.
A marked improvement in CIMB Group Holdings’ key financial metrics in recent times, especially its return on equity (ROE), has caught the attention of analysts and made it one of the top stock picks in the banking sector this year. It was one of only two local banking groups that turned in better-than-expected earnings in the second quarter, prompting several research houses to raise their earnings forecast and target prices for CIMB.
However, given the growing macroeconomic headwinds and expectations that interest rates are likely to stay at elevated levels for longer than initially thought, some wonder if CIMB can keep up its positive momentum. Its ROE, a key measure of profitability, improved significantly from 8.5% in FY2019 to 10.6% in 1HFY2023. It remains to be seen if CIMB can meet its target of 11.5% to 12.5% by FY2024, as set under its Forward23+ strategic plan.
