- CIMB Group Holdings Bhd’s (CIMB) 93.7%-owned subsidiary CIMB Thai Bank plc (CIMB Thai) registered a better net earnings on a QoQ basis, at THB275mil (+49% QoQ, -34% YoY) for 3QFY14, mainly on the back of better non-interest income.

- Net earnings contribution to the group earnings by CIMB Thai is estimated at about 2.6% in 3QFY14 (based on our forecasts), better than the 1.9% seen in 2QFY14.

- Gross loans was slightly more muted at 2.7% QoQ in 3Q (2Q: 3.6% QoQ), leading to an annualised growth of 8.8%. Deposit growth was stronger at 4.7% QoQ (2Q: 4.3% QoQ) which means an annualised growth of 12.0%. Gross loan-to-deposit (LDR) ratio is estimated to have eased to 113% in 3Q, from 116% in 2Q. The company alluded to intense competition in both the loans and deposit segment.

- We estimate net interest margin (NIM) at 3.38% in 3Q, off from a high base of 3.43% in 2Q but still ahead of the circa 3.2% to 3.30% level in 1H14. The company said that on a nine-month basis, NIM has improved by 16bps to 3.36% in 9MFY14 from 3.20% in 9MFY13. This was attributed to better control of costs.

- Non-interest income did relatively better, on the back of gain on trading and foreign exchange transaction, and gains on investments. The company said this was due to improved traction in its treasury business.

- Gross non-performing loans (NPL) has continued to rise, but at slower pace of 2.2% QoQ in 3Q (2Q: 2.2% QoQ) to THB6bil from THB5.6bil. Gross NPL ratio came in at 3.3% (2Q: 3.1%). The company said the increase in NPL was mainly due to the economic and political disruptions which affected borrowers’ repayment ability.

- We estimate credit cost at 108bps in 3Q vs. 98bps in 2Q. Loan loss cover came off to marginally to 94.5% in 3Q if compared to 100.8% in 2Q. All in, CIMB Thai’s 3Q results indicates that while there is ongoing cautious stance n loans growth, NIM has continued to improve with better costs control. Non-performing loans looks to be well contained despite the political uncertainties since end-2013. We maintain HOLD on CIMB.

Source: AmeSecurities