Investment Highlights

• We maintain our BUY call on CIMB Group Holdings (CIMB) with an unchanged fair value (FV) of RM6.60/share, pegging the stock to FY23F P/BV of 1.0x based on an ROE of 9.7%.

• We make no changes to our earnings estimates as 1QFY22 underlying earnings were within expectations, accounting for 28% of our estimates. It was slightly above consensus, making up 31.7% of street numbers.

• 1QFY22 core earnings were higher at RM1.5bil (+85.7% QoQ) after stripping out an exceptional item net of tax and minority interest (MI) of RM45mil, the impact of Cukai Makmur of RM78mil and mod loss. The Improvement on QoQ basis was contributed by higher trading income, lower operating expenses (opex) and provisions.

• Comparing YoY, 1QFY22 core net profit rose by 20%. The improved performance was underpinned by higher net interest income (NII), lower opex and provisions partially offset by reduction in non-interest income (NOII) from a decrease in trading income.

• The group's gross loans grew at a faster pace of 1.8% QoQ or 5.0% YoY. This was supported by growth in consumer, commercial and wholesale banking loans.

• In 1QFY22, the group’s NIM expanded by 4bps QoQ to 2.45% contributed by improved interest margins in Malaysia, Singapore and Thailand. Higher NIM in Malaysia (+4bps) was attributed to higher loan yields and stable funding cost. Every 25bps hike in OPR will positively impact the group’s NIM by 1–2bps.

• CASA ratio rose to 43.5% due to strong CASA growth of 9.9% YoY.

• Underlying opex for 1QFY22 was well contained at +0.8% YoY. CI ratio improved to 47% for 1QFY22.

• In 1QFY22, credit cost (based on loans) of 30bps was within FY22F guidance of 60–70bps. Provisions for loan losses fell by 60% YoY due to decline in impaired credits, management overlays and Covid-19 related provisions.

Source: AmInvest Research - 1 Jun 2022