The Group’s healthy financial performance continued into 2QFY21 with a core net profit of RM1.32bn (+291.2% YoY, +1.4% QoQ) reported. Cumulative 1HFY21 core net profit of RM2.39bn (+203.9% YoY) continues to be ahead of our and consensus expectations at 79% and 64% of full-year estimates respectively, the discrepancy coming better-than-expected non-interest income (NoII) despite some moderation seen in the current quarter, which also included intangible asset write offs. While we think some of these numbers will still normalize in subsequent quarters, we lift FY21/FY22/FY23 estimates higher by 24.8%/13.3%/12.1% as we make adjustments to NoII and take a less pessimistic view on credit costs. Recent re-imposition of movement restrictions may lead to an uneven domestic recovery momentum, though we remain optimistic over CIMB’s longer-term prospects, underpinned by its F23+ initiatives. We retain our Neutral call though we lift our target price of RM5.10 on account of the earnings changes.
- Operating income for 1HFY21 was 18.3% higher YoY to RM9.47bn due to significantly stronger non-interest income (+29.8% YoY) which came from Treasury-related wealth management income. Net interest income (+14.8% YoY) was helped by margin improvements in Malaysia and Indonesia.
- Loans outstanding contracted 0.2% YoY, due in part to pandemic-affected business conditions (in Malaysia) and portfolio reshaping (in Indonesia) under its F23+ initiative. Growth areas will continue to be its Group consumer book, Malaysian Commercial segment and Indonesian SME segment. To be fixed are both the Indonesian and Singaporean SME segments, while the Thai Commercial segment will be exited from.
- Net interest margin (NIM) improved a further 4bps QoQ to 2.56%, driven in part by its healthy CASA ratio of 41.6% (1QFY21: 42.3%). Management’s NIM guidance for FY22 remains unchanged at +10bps to +20bps (to ~2.45%).
- Asset quality continues to improve following a torrid 2020. Credit cost for 2QFY21 is down to 0.71% (Figure 2) even as the Group undertook a further ~RM190m (RM79m for macro factors, RM109m for COVID-19) in overlay this current quarter, particularly for its Malaysian consumer ad SME segments. Current allowance coverage is 102.2% (1QFY21: 101.9%) as gross impaired loans remained steady at 3.4% (1QFY21: 3.4%).
On the Group’s exposure to loans under moratorium and restructuring, notable weakness was seen in its Malaysian consumer and commercial segments (Table 2) in 2QFY21 as the country re-imposed movement restrictions which resulted in temporary (but widespread) business closures.
Source: PublicInvest Research - 1 Sept 2021