CIMB Group Holdings Bhd - CIMB Thai: Strong Growth in Earnings

Date: 19/04/2019

Source  :  MIDF
Stock  :  CIMB       Price Target  :  7.55      |      Price Call  :  BUY
        Last Price  :  5.28      |      Upside/Downside  :  +2.27 (42.99%)


  • Strong growth in earnings led by NII expansion and lower provisions
  • NII expansion was supported by higher gross loans and higher interest income on investments
  • Higher OPEX was due to personnel cost
  • Asset quality stable
  • No change to our forecast
  • Maintain BUY with unchanged TP of RM7.55 pegging the stock to 1.4x FY19 Price-to-Book multiple.

Strong growth in earnings. CIMB Thai 1QFY19 net profit grew +92.4%yoy to THB325m. This was also a turnaround in earnings from the losses in 4QFY18. The strong earnings growth was due to robust income growth and lower provisions.

NII led total income expansion. NII rose +4.3%yoy to THB2.71b despite lower NIM where it compressed by -67bps yoy to 3.31%. The NII growth was supported by higher gross loans which increased +8.0%yoy to THB230.9b, and higher interest income on investments. Meanwhile, the NIM compression was due to higher cost of fund.

NOII increase was stunted by losses on financial instruments. NOII expanded by +0.3%yoy to THB789m as it was curtailed by losses of THB840.2m from on financial instruments designated at FVTPL. The losses was moderated by sale of NPL which saw gains of THB169.4m. Overall, total income grew +3.4%yoy to THB3.5b.

Higher OPEX due to increased personnel cost. OPEX grew +8.2%yoy to THB2.09b. This was due to higher personnel cost which grew +11.6%yoy to THB1.21b. However, this was probably due to continued hiring of personnel in order to grow the Group's franchise in Thailand. As such, we believe this as a positive sign.

Provisions went down. Provisions in 1QFY19 fell -17.4%yoy to THB971m. We opine that this was partly from the sale of NPLs. The gross NPL stood at THB10.0b, with a stable gross NPL ratio of 4.3%, unchanged from the previous quarter and improved from 5.2% as at 1QFY18.

Source: MIDF Research - 19 Apr 2019

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