This article first appeared in The Edge Financial Daily on November 20, 2017

CIMB Group Holdings Bhd
(Nov 17, RM6)
Upgrade to buy with an unchanged fair value of RM6.60: CIMB Group Holdings Bhd announced that it has obtained the approval to operate a branch in the Philippines from the monetary board of the Bangko Sentral ng Pilipinas (BSP). After mulling over opening a branch in the Philippines to complete its footprint in Asean countries, the group has finally secured the approval of the BSP.

It will operate a retail branch in the Philippines by the fourth quarter of 2018 (4Q18). We believe this approval will allow it to operate in the Philippines through a wholly-owned banking subsidiary.

The award of the licence is in line with liberalisation of the banking sector in the Philippines. The banking sector in the Philippines has been opened up to achieve greater financial integration and economic development among the Asean member countries.

Eventually with this licence, the group will have presence in 10 Asean countries (Malaysia, Indonesia, Singapore, Thailand, Cambodia, Brunei, Vietnam, Myammar, Laos and the Philippines). This will strengthen the group’s product and service offerings as a universal Asean bank.

This follows the group’s earlier success in obtaining a banking licence in Vietnam in 2016, from the State Bank of Vietnam. Recall that the licence had allowed the group to offer retail and commercial banking products in Vietnam.

With the retail branch in the Philippines to be fully operational only by 4Q18, and with the need to incur start-up expenses, the impact on our projected numbers for financial year 2018 (FY18) is expected to be minimal. We maintain our forecasts for now, pending the review of the group’s third quarter of FY17 results, which are expected to be announced on Nov 28, 2017.

Among its peers, Maybank already has a presence in the Philippines via its commercial banking business under its 99.97%-owned Maybank Philippines Incorporated, as well as through its investment banking arm, Maybank Kim Eng. The operations of Maybank’s commercial banking in the Philippines are significantly larger than that of CIMB, with a network of 79 branches, located in various key cities of the country. — AmInvestment Bank, Nov 17