The Group saw another encouraging quarter with 2QFY22 net profit coming in at RM1.28bn (+18.1% YoY, -10.3% QoQ) despite an uptick in provisions due to lower writebacks and higher provisioning overlays undertaken. Cumulative 1HFY22 core net profit of RM2.71bn (+13.5% YoY) is slightly ahead of our and consensus expectations at 56% and 54% of full-year estimates respectively, though we continue to err on the side of conservatism and keep estimates unchanged in light of macroeconomic headwinds. We continue to remain optimistic over CIMB’s longer-term prospects nonetheless, underpinned by its F23+ initiatives and retain our Outperform call with an unchanged target price of RM6.00.

• Operating income for 2QFY22 was 2.7% higher YoY, driven largely by net interest income growth (+3.8% YoY to RM3.68bn) as non-interest income contributions slipped (-0.7% YoY to RM1.21bn), the latter weighed by lower trading income contributions (-16.3% YoY). By business segment, stronger consumer banking contributions (+4.7% YoY) are attributed to healthier loans growth (+8.4% YoY) and fee income improvements in Thailand and Indonesia. Commercial banking was higher by +4.5% YoY, also due to healthier loans growth (+5.1% YoY), improved net interest margins and better trading income from Singapore.

• Net interest margin (NIM) inched 2bps higher QoQ, benefitting from the rate hikes, particularly Malaysia’s. Management retains its view of a +5bps improvement to NIM this FY22 in the current rising interest rate environment.

• Loans growth (+6.8% YoY, +2.5% QoQ) is being driven by working capital loans (+13.3% YoY, +5.4% QoQ), partly reflective of economic sector re openings, as well as mortgage loans (+8.2% YoY, +2.0% QoQ). In line with its F23+ initiatives, the Group will continue to focus on the Malaysian Commercial (business banking and SME) and Consumer businesses, as well as the Indonesian Consumer and SME segments. Management is guiding for a 6%-7% overall growth this FY22.

• Asset quality. Cumulative 1HFY22 provisions fell 35.7% YoY, though 2QFY22 numbers saw an uptick (+13.7% QoQ to RM482m) due to lower write-backs and higher overlays undertaken as the Group made revisions to its assumptions after taking a prudent view on macroeconomic factors and overlays. Loan loss charge is a higher 49bps (1QFY22: 34bps), with management maintaining its loan loss charge guidance of 50bps-60bps for FY22. Gross impaired loans is largely unchanged at 3.5% (1QFY22: 3.4%), with allowance coverage at 99.6% (1QFY22: 102.1%).

Source: PublicInvest Research - 1 Sept 2022