KUALA LUMPUR (Sept 1): Analysts foresee better performance by CIMB Group Holdings Bhd, despite the regional banking group reporting second quarter and first half profit drop from a year earlier.

Analysts such as those from Public Investment Bank Bhd and TA Securities Holdings Bhd have maintained their forecast for CIMB (fundamental: 1.05; valuation: 2.25), after CIMB's management indicated the worst might be over.

For the second quarter ended June 30, 2015 (2QFY15), CIMB's net profit fell to RM639.75 million, from RM949.94 million, although revenue rose to RM3.83 billion, from RM3.41 billion.

For 1HFY15, CIMB's net profit declined to RM1.22 billion, from RM2.02 billion a year earlier. Revenue was higher at RM7.51 billion, versus RM6.95 billion.

Public Investment said: “CIMB’s 2QFY15 net profit of RM639.8 million showed some encouraging signs of improvement on a q-o-q basis, registering a 10.3% growth, though also worrying in some aspects."

“While loans growth was robust, impaired loan levels also rose. Indonesia continued to be a drag on earnings, but management sees the worst likely behind it,” Public Investment said in a note today.

Public Investment, which maintained its CIMB income forecast, also kept its “neutral” call on CIMB shares, with an unchanged target price (TP) of RM5.70. Public Investment said it saw trading opportunities in CIMB shares, should there be further weakness in the counter.

At 12:30pm, CIMB shares rose two sen or 0.4% to settle at RM5.02, bringing the group's market capitalisation to RM42.62 billion.

TA Securities Holdings Bhd also kept its CIMB income forecast and retained recommendations for CIMB shares.

TA has a RM6.50 TP and "buy" call for CIMB shares.

"The increase in NPLs (non-performing loans) did not come as a surprise. Bulk of the increase was due to Indonesia and Thailand.

“Management believes the worst is over. 2HFY15 should show some improvement. As such, we are keeping our forecast unchanged. Downside risk could however, come from Malaysia, although asset quality here remains intact for now,” said TA.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)