PublicInvest Research

CIMB Group Holdings Berhad - Progress On Track

PublicInvest
Publish date: Tue, 01 Mar 2022, 10:56 AM
PublicInvest
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp

PUBLIC INVESTMENT BANK BERHAD (20027-W)
9th Floor, Bangunan Public Bank
6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
T 603 2031 3011 | F 603 2272 3704 | Dealing Line 603 2260 6718

The Group reported a core net profit of RM854.5m (+>100% YoY and QoQ), contributing to a cumulative FY21 core net profit of RM4.61bn (+286.2% YoY) which is within our and consensus expectations at 102% and 103% of full-year estimates respectively. YoY improvements were on account of better operating margins, healthier cost controls and lower loan loss charges. We adjust FY22/FYY23 estimates higher by 3.0% on average as we make further adjustments on account of the above. Near-term asset quality concerns notwithstanding, we continue to remain optimistic over CIMB’s longer-term prospects underpinned by its F23+ initiatives and opine that this should be adequately mitigated by its provisioning overlays. We retain our Neutral call given limited upside to our raised target price of RM6.00 (RM5.50 previously).

  • Operating income for FY21 (on a business as usual basis) is 8.2% higher YoY to RM18.37bn, with strong net interest income growth (+11.5% YoY) underpinned by margin expansions and loans growth mitigating the 1.1% YoY decline in non-interest income contribution owing to drops in trading and foreign exchange income.
  • Net interest margin (NIM) improved a notable 18bps YoY to 2.45% owing to improved funding costs, though margin pressures are now expected in the coming financial year, notably from Indonesia and Singapore.
  • Loans growth (+3.3% YoY, +1.5% QoQ) momentum is starting to pick up though management indicated that it will continue to remain cautious as it focuses only on capital-accretive segments in line with its F23+ initiatives. Growth areas will continue to be its Group consumer book, Malaysian Commercial, and Indonesian Consumer and SME segments. FY22 loans growth target is between 5% and 6%.
  • Asset quality. Total provisions for FY21 was lower by 53.6% YoY due to reduced overlays and lower non-retail provisions, though there was also a slightly worrisome increase in 4QFY21 provisions due to additional overlays and top-up for legacy accounts (due to specific and relatively large exposures) and other receivables. Gross impaired loans remains steady at 3.5% (FY20: 3.6%), with loan loss charge at a much-improved 73bps (FY20: 151bps). Management has guided for a loan loss charge of 60bps-70bps for FY22 given ongoing uncertainties on the macro front and its conservative view on non-retail legacy accounts.

Source: PublicInvest Research - 1 Mar 2022

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LALA

Nothing is permanent. Don't stress yourself too much, because no matter how bad the situation is.. It will change.

2022-03-01 11:49

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