CIMB’s 9M16 core net profit improved by 26% YoY and was within our/consensus estimates at 78%/70%. No change in our earnings forecasts as economy conditions in the ASEAN region remain challenging going forward. TP maintained with MARKET PERFORM call reiterated.

9M16 core net profit (CNP) of RM2560m (+26% YoY) was within expectations, accounting for 78%/70% of our/consensus estimates brought about by falling opex at 9% despite slower income growth of +2.2%. No dividend declared as expected. Loans growth was slower than expected at +2.2% YoY with NIM compression less than 4bps (9M15: -10bps). Deposit taking was higher than loan at +8.3% with domestic deposits growing +10.5% YoY. On a quarterly basis, CNP was flat as topline growth was marginal at +1.8%, attributed to subdued loans growth. Loans and deposits growth were mixed with the former slower at +2.3% and the latter faster at +6.5%.

9M16 vs. 9M15, YoY

• 
  Core Net Profit (CNP) was up by 26.5% driven by lower opex with total income grew slower at 2.2%. A one-gain item of RM149.8m was recorded for 3Q16 (due to sale of PT Sun Life) which pushed earning by 33.9% to RM2709.8b.
• Compared to the previous corresponding period, top line growth moderated at +2.2% (9M15: +8.6%) due to slower growth from (i) Net Interest Income (NII) at +4.4% (9M15: +7.2%), and (ii) decline in Non-Interest Income (NOII) at 5.3% (9M15: +12.4%) but offset by improved performance from Islamic Banking Income at 10.8% (9M15: +6.3%). Islamic banking income was supported by strong financing growth of 10.0%.
• Annualised group NIM fell by 4bps to 2.56% as cost of funds (+5bps) outpaced the rise in lending yields (+2bps). However, improved NIMs were seen in both Indonesia (+14bps) and Thailand (+51bps).
• Cost Income Ratio (CIR) was down by 7ppts to 55.3% (vs. industry’s CIR of 48.8%) as opex fell 9% vs. total income growth of +2.2%. Fall in Opex was driven by fall in personnel cost, establishment and marketing expenses.
• No change at the PBT level, with Malaysia still the biggest contributor, accounting for 75% (9M15: 75%) followed by an improved Indonesia at 15% (9M15: 8%) with Singapore and Thailand contributions falling at 5% and 4%, respectively (9M15: 9% and 6%, respectively).
• Loans were slower compared to the previous corresponding period at +2.2% (9M15: +19.3%) vs. our estimates of +9% and the industry average of +4.2%. On a geographical basis, loans were driven by domestic demand at +8.2% negated by falling demand from Indonesia (-2.7%) and Singapore (-5.7%). By type, loans were driven by mortgage financing (which contributed 26.7%) at +10.1%. As such, loans composition has also changed slightly with Malaysia at 57% (9M15: 52%), Indonesia at 20% (9M15: +19%) and Thailand at 9% (9M15: 8%). Loans composition from Singapore has also fallen to 9% from 13% in end-Sep15.

Source: Kenanga Research - 17 Nov 2016