Results

• Results in line. CIMB 4Q17 net profit was stronger at RM1.06bn (+24.1%yoy), lifting FYM17 net profit to RM4.4bn (+25.6% yoy), in line with HLIB, but slightly above consensus at 103.6% and 106.8% respectively.

Deviation

• None

Dividends

• Declared second interim dividend of 12 sen, bringing FY17 dividend to 25 sen, translating to 50% payout and dividend yield of 2.7%.

Highlights

• 4Q17. 4Q17 net profit of RM1.06bn (24.1% yoy) was driven by higher operating income (+5.9% yoy) and contained loan loss-provision (-21.6% yoy), but partially offset by higher opex (+3.4% yoy). The surge in operating income was boosted by an increase in NOII (due to higher fee income and forex income) and NII (arising from higher loan growth).

12M17. Higher opex recorded (+5.6% yoy) was well mitigated by a 10% rise in operating income and a 8.5% lower LLP. LLP stayed elevated at 69 bps due to the additional impairment incurred in 4Q17.

• Loan subdued. FY17 loan growth was subdued at only +0.2% yoy. Malaysia loan grew in tandem with industry at +4.1% yoy whilst other key markets’ growth were in mixed, with Indonesia and Singapore recording loan contraction of 2% and 14.3%, while Thailand recording a growth of 0.8%. On a YoY basis ex-forex, loan grew by3.1%

• Deposits. Deposits grew by 3.6% yoy, driven mainly by stellar deposit growth in Malaysia (+12.4%). The slower loan and deposits growth pushed LDR flat at 90.6%.

• NIM compression. CIMB ended FY17 with flat NIM at 2.63%, however on qoq, NIM was down by 7bps owing to NIM compression in Indonesia (arising from recent rate hike and surplus liquidity).

• Asset quality. GIL ratio weakened from 3.3% in FY16 to 3.4% in FY17, on the back ongoing concern in Singapore (+60% yoy) and Thailand (+20% yoy). LLC ratio fell to 70.5% from 72.4% in 9M17.

Risks

• Slower loan growth, additional impairment in Singapore and Thailand and NIM compression.

Forecasts

• We raise FY18-FY19 net profit forecast by 4.7% and 9% in view of lower credit cost and higher NII.

Rating

BUY ( ↔ )

• Although CIMB missed its loan growth target in FY17, we are optimistic that CIMB is poised to post another better performance in FY18 (albeit management’s guidance was somewhat conservative, in our view), benefitting from the tail end of T18 strategy that ensure further earnings recovery and ROE expansion.

Valuation

• Post earnings revision, we maintain our BUY rating with higher TP of RM7.90. Our TP was derived from i) COE of 10% and ii) WACC of 8.7%.

Source: Hong Leong Investment Bank Research - 1 Mar 2018