CIMB sees RM1.41b erased from market cap

KUALA LUMPUR: CIMB Group Bhd saw RM1.41 billion erased from its market capitalisation on Monday, July 18 after it came under some selling pressure on concerns about its Indonesian banking operations.

It closed 19 sen lower at RM8.56 with 23.05 million shares done. This was the lowest since June 23.

Its decline dragged the FBM KLCI down by 3.28 points. The KLCI closed 14.67 points down to 1,562.58, mirroring the weak regional and European markets. The fall in CIMB’s share price reduced the banking group’s market capitalisation to RM63.624 billion.

Worries about the central bank of Indonesia possibly introducing a cap on foreign ownership in local banks later this year had worried investors, though such speculation had been reported since last week.

ECM Libra Research said although it remained cautiously optimistic that the new regulation may not be applied retroactively given the difficulties in implementing the policy without potential backlash from foreign investors, this could pose a downside risk to CIMB and Maybank’s earnings prospects, if it was being employed retroactively.

The research house said that current rules in Indonesia make it possible for local banks to be up to 99.0% controlled by one shareholder, including foreign parties.

“We view this development to be potentially negative for CIMB and Maybank, given their majority stakes in the respective Indonesia banks. At present, CIMB owns 96.9% of CIMB Niaga while Maybank owns 97.5% of Bank Internasional Indonesia (BII). As such, the implementation of this regulation could force the banks to dispose their stakes and dampen their earnings prospects,” it said.

ECM Libra Research also said CIMB would be more severely impacted, given that CIMB Niaga’s large contribution to the group’s bottomline and to remain its key earnings driver to the group going forward.

“In 1QCY11, CIMB Niaga contributed 27.2% of CIMB’s profit before tax (PBT) while BII contributed 4.0% of Maybank’s PBT,” it said.