We attended CIMB’s pre-4QFY21 results briefing where management is overall confident that its earlier set targets should be mostly met. While little insight on the group’s FY22 projections was offered, management aims to continue focusing on acquiring better quality accounts over high financing growth rates. Maintain MP and TP of RM5.20.

URUS is still a non-event in FY21 but will spill over into FY22. Given that URUS applications only close in 31st January 2022, management anticipates for a lumpy influx to be only seen then. Presently, the program’s intake is still relatively insignificant at possibly less than 1% of its Malaysia books. Regardless, any rise should not trigger excessive provisioning needs as pre-emptive buffers are adequate. Meanwhile, the recent Klang Valley floods are not expected to lead to much consequence as the group had readily offered flood assistance programs in the past.

Loans quality over loans quantity. Management represented that it saw sequential improvements in its loans book in line with the year-end economic recovery. Management also expected the overall industry to see sustainable traction but stands that it would rather perform below industry growth rates in favour of better book quality. That said, key drivers for loan demands are expected to be consumer and commercial segments. We expect the group to end FY21 with a 5% growth in loans (9MFY21: 4.9%) with FY22 loans growth to linger at 4% (below our Malaysia industry target of 5%).

NIM prospects could be mixed. The group expects some mixed exposure in the event of a rate hike in FY22, premised on its strategy in managing competition. Broadly, its Malaysia operation could benefit from a rate hike as the group is still not as participative in the competition for deposits and may still yield some gains in the near-term. Meanwhile, Thailand and Indonesia operations may experience a more neutral impact with their landscape being more rate-sensitive and hence may require more immediate repricing methods. Overall, an increase in regional wide rates could translate to an earnings uplift of RM80m-RM100m (<2% of our FY22 net earnings expectation) to the group on a rolling 12-month basis.

NOII segments could be challenged. In terms of NOII, trading performance should have picked up sequentially in 4QFY21 on a reinvigorated investing climate. However, this is expected to ease in FY22 where management may depend on fee-based results to support overall income. We believe this may be more prominent in the debt securities markets as interest rate hikes are typically unfavourable to bond prices. The credit card segment is expected to be a stronger performer, which we reckon is in line with higher spending as a translation of better economic prospects.

Post meeting, we leave our earnings assumptions unchanged for now. The upcoming 4QFY21 results are slated to be released on 28th February 2022.

Maintain MARKET PERFORM and TP of RM5.20. Our TP is based on an unchanged FY22E GGM-derived PBV of 0.84x (0.5SD below 5-year mean). Following the recent industry-wide rally, we believe there might be little upside to the stock’s performance for now. Still, patient investors may look towards the stock’s modest dividend returns which are expected to improve as we move to a post-pandemic landscape.

Source: Kenanga Research - 19 Jan 2022