Tuesday, 23 August 2011

Local Banks: CIMB in Focus?

The market has been volatile since the drastic slide on 5th Aug. Some people start to worry about a double dip, some not. The Bursa Index has fallen almost 75 points or 5%. Not so much actually. However, is the market just taking a breather and will continue to slide soon?

Perhaps it may be time to hunt for some blue chips. Here are the price movement of major local banks since 4th Aug 2011.

4 Aug 22 Aug % Drop
AMMB 6.49 6.40 1.40
CIMB 8.40 7.77 7.50
HLBANK 13.56 12.78 5.70
MAYBANK 8.85 8.64 2.40
PBB 13.42 12.90 3.90
RHB 9.22 8.93 3.10

Maybank and CIMB actually started their down trend journey in early July when Indonesia government plans to restrict foreign ownership of commercial banks there. This regulation may go into effect as early as Q4 this year. Both CIMB and Maybank have business there, especially CIMB, with its 97.9% owned PT Bank CIMB Niaga.

So, CIMB's share fell the most among all the banks. Then, is it the most "valuable" buy at the moment?

Indonesia has about 100 banks and 47 of them have foreign ownership. CIMB Niaga is Indonesia's fifth largest bank by asset size with 845 outlets! It just recorded a RM545mil net profit for the 1HFY11 ended June 2011, a 37% increase from a corresponding period a year ago. If foreign ownership restriction is implemented, it will affect CIMB's earning.

CIMB recently entered into India market for the first time with its opening of Mumbai's office.

There is a source which says that MBF holdings is keen to offload its credit card business and CIMB will be the one who will take over it. This news may be announced "very soon" and surely will benefit CIMB a lot.

CIMB is going to announce its latest financial result soon. So lets see how it is.

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