CIMB’S JV STAKE SALES VALUE-ACCRETIVE

PublicInvest says move will increase bank’s capital ratio

KUALA LUMPUR

CIMB Group Holdings Bhd’s divestment of its asset management arms is another valueaccretive move, analysts said. Public Investment Bank Bhd (PublicInvest) said the move will improve CIMB’s capital ratios with no significant impact to earnings from the dilution in stakes.

“We laud management’s initiatives and are growing increasingly optimistic of its medium to longer-term prospects,” the firm said in a report yesterday.

CIMB announced on Thursday overnight that it had entered into sales and purchase agreements with Principal Financial Group for the divestment of minor stakes in asset management joint ventures (JVs) CIMB-Principal Asset Management Sdn Bhd (CPAM) and CIMB-Principal Islamic Asset Management Sdn Bhd (CPIAM).

The transaction will see a disposal gain of about RM950 million and result in 0.18 per cent improvement to its Common Equity Tier-1 (CET1) ratio.

PublicInvest said there is also scope for further earnings upside should CIMB’s regional exposures make quicker-than-expected turnarounds.

The group has been undertaking a series of disposals in recent months to realign its operations amid a changing and increasingly competitive landscape.

Its 18 per cent stake in Bank of Yingkou has been sold with a oneoff gain recognised.

It is also completing its transaction with China Galaxy Securities, allowing the bank to tap China’s growing dominance in the global space and, at the same time, benefitting on the cost-income ratio front.

Hong Leong Investment Bank Bhd (HLIB) is not surprised with the transaction as it was in line with CIMB’s T18 targets which includes CET1 ratio of 12 per cent.

“Overall, we are neutral on the announcement as both entities provide stable earnings to the group,” said HLIB which raised its target price on CIMB shares to RM7.25 from RM6.90.