PublicInvest Research

CIMB Group Holdings Berhad - Progress On Track

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

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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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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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