Period     1Q13/3MFY13

Actual vs. Expectations     The reported 1QFY13 PAT of RM1,386.2m was above the consensus forecast (29%) and that of ours (29%).

However, if we were to exclude the one-off RM515m gains from the sales of CIMB Aviva and net off the RM200m restructuring cost, the normalised RM1,150.0m PAT was within our expectations (24%).

Dividends    No dividend was proposed.  

Key Result Highlights    The 1Q13 net interest income saw a moderating growth rate at -0.6% QoQ and 9.1% YoY to RM1,896.6m.  QoQ, the +3.2% loans growth was strong while the loan-todeposit ratio was lower at 81.1%. The net interest margin narrowed by 5bps to 2.88%, contributing to the flat net interest income growth. 

That said, the 13.5% YoY loan growth came in within our forecast of 13% but marginally lower than management’s guidance of 15%. The moderating loans growth number was partly deflated by the IDR/RM depreciation. 

The 1Q13 non-interest income was healthy at RM1,169.0m (excluding the one-off gain, +7.2% QoQ) due to higher corporate banking business and treasury gains, which resulted in a stronger contribution from its wholesale banking segment PBT at RM734m, which was up 12.1% from 4Q12’s RM654m. The PBT of RM481m from Investment was also 370.6% higher due to the oneoff gain mentioned above. The total RM900m in PBT (on a recurring basis) contributed by these two segments was higher by 19% QoQ.  

The net impaired ratio was at a historical low of 0.7% with a 82.3% allowance coverage. The 15bps credit charge was below our forecast of 30bps. 

The higher than expected cost of RM2,219.0m was higher by 12.9% QoQ, pressuring further the bottom line.

The group recognised 100% of the RBS franchise earnings and provided RM200m for the restructuring cost. The group meanwhile achieved a full year cost-toincome ratio of 56% (slightly above ours of 52%).

The achieved recurring ROE of 15.7% was within our expectations.

Outlook    During the briefing to analysts, management said it maintained its mildly positive view on the 1H13 outlook, which is seen to be driven by consumer banking.  Meanwhile, the group remained positive on its recent RBS acquisition, although the main earnings rise here would only kick in from 2H13 in our view.

Change to Forecasts    Maintaining our FY13-14E PAT forecasts of RM4,751.1m- RM5,127.1m for CIMB Group.

Rating  Maintain MARKET PERFORM

Our MARKET PERFORM rating on CIMB is maintained.

The current share price is already near our TP of RM8.60, offering little upside potential.

Valuation     We have rolled forward our valuation year to FY14 and adjusted upwards our target price to RM8.60 (from RM7.70 previously) based on an unchanged targeted P/BV of 1.9x over its FY14 BV of RM4.50.

Risks    Tighter lending rules and a margin squeeze.

Source: Kenanga