CIMB Thai’s 1H16 performance was below expectations although core earnings grew by 5% YoY to THB367m brought about by dismal performance in the 2Q. No dividends announced as expected. As the bank contributed less than 3% of the Group earnings, we made no revision to our overall forecast with TP of RM4.87 and maintain our OUTPERFORM call.
CIMB Thai’s 1H16 net profit was below expectations accounting for 30% of streets’ estimate but it registered a 5% YoY jump. A weak 2Q (-88% QoQ) dragged its overall performance. 1H16 growth was attributed to decent performance from Net Interest Income and higher operating gains. Net Interest margin also improved but credit cost continued to spike up.
1H16 vs. 1H15, YoY
2Q16 vs. 1Q16, QoQ
Not much to look forward to. The Thai economy is expected to be subdued for 2016 as weak exports and slow domestic consumption continue to drag the economy. The Bank of Thailand kept interest rates steady at 1.5% since April 2015 to encourage spending and promote growth. The subdued economy for 2016 is expected to put upward pressure on its loan provisioning and NPL ratio. However, we see profitability holding up with its cost rationalizations (branches have been reduced by 38%) and NIM holding up. The banking industry has toned down deposit mobilisation to ease their worries over NIM, while the excess liquidity in the banking system is supporting the banks' desire to refrain from chasing deposits.
Source: Kenanga Research - 22 Jul 2016
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