CIMB may increase its capital return commitment to support the success of its share buyback

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CIMB increases capital return commitment

Highlights

CIMB may increase its capital return commitment beyond RM2 billion to strengthen its share buyback programme, with RM700 million already returned through special dividends.
CIMB has repurchased 20.76 million shares worth RM163 million since 21 Sept, but MBSB Research lowered its target price to RM9.20 from RM9.29.
CIMB's share buyback programme could signal a broader sector trend, potentially prompting banks such as Public Bank and RHB Bank to consider similar measures.

This article was translated from the original. Read the original version by our correspondent here.

Expectations of a revision to the capital return plan

According to The Edge Malaysia, citing a research note by MBSB Research, CIMB could increase its RM2 billion capital return commitment to improve the likelihood of investor acceptance of its share buyback programme. The research firm said a higher capital return commitment could help offset potential disappointment among investors expecting a larger portion of the amount to be returned through special dividends.

MBSB Research said there is a possibility that CIMB will positively revise the RM2 billion figure, and that the bank is sufficiently confident in its ability to generate adequate capital before signalling to the market through share buybacks. So far, RM700 million under the capital return scheme has been returned through special dividends.

The firm also noted that share buybacks have historically not been particularly successful in Malaysia. However, for CIMB, the main purpose of the move is to continue supporting earnings per share, return on equity and dividends per share, especially as the bank remains slightly behind its return on equity target for the financial year ending 31 Dec 2026.

CIMB has also been buying back shares daily, with a cumulative total of 20.76 million shares worth RM163 million repurchased since 21 Sept. MBSB Research maintained its “buy” call on CIMB but lowered its target price to RM9.20 from RM9.29, based on an unchanged FY2027 price-to-book ratio forecast of 1.33 times.

Implications for Malaysia's banking sector

CIMB's share buyback programme is also being monitored for its potential impact on other banks. MBSB Research described it as the first major share buyback scheme by a Malaysian bank for capital management purposes in years, and said its successful implementation could encourage other major banks to consider similar measures.

The research firm listed Public Bank Bhd and RHB Bank Bhd as potential candidates. Public Bank has obtained shareholder approval for buybacks of up to 10% of its shares but has yet to implement them, while management has stressed that the option is more of a capital optimisation tool rather than a predetermined course of action.

As for RHB Bank, MBSB Research said the bank has high capital ratios and has historically released excess capital through larger distributions in the fourth quarter. The bank is currently preparing a new capital release plan scheduled to be announced by the first quarter of FY2027.

At the time of writing, CIMB shares were down three sen, or 0.39%, to RM7.76, valuing the lender at RM84 billion.

In our previous article on UMS Integration's proposed share placement, we outlined the company's plan to raise up to RM450 million through the issuance of up to 52.94 million new shares at RM8.50 per share. We also explained how the funds would be used, including for automation and capacity expansion in Penang, as well as to support the expansion of operations in Vietnam and Singapore.

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