CIMB’s 1QFY13 results were lifted by a MYR515m gain from the disposal of CIMB Aviva, partly offset by restructuring costs of MYR200m. Stripping these out, it was still a decent start with underlying pre-tax profit accounting for 22% of our full-year estimate. We tweaked down our FY13-14 EPS projections but fair value is raised to MYR10.90 from MYR9.90 after rolling forward valuations to 2014. BUY call maintained.

- 1QFY13 results – in line.  CIMB’s reported 1Q net  profit of MYR1.39bn (+37% y-o-y; +28% q-o-q), which accounted for 28% of our and 29% of consensus full-year net profit estimates respectively. We consider the results to be in line with expectations as 1Q13 net profit was lifted by the gain from sale of CIMB Aviva of MYR515m, partly offset by restructuring charges of MYR200m. Notwithstanding these one-offs, it was still a very decent start for CIMB, with 1Q13 underlying pre-tax profit accounting for 22% of our full-year estimate.

-  Result highlights.  Excluding the divestment gain, 1QFY13 operating income rose 2% q-o-q and 5% y-o-y. Loan growth was surprisingly robust (+3% q-o-q; +12.7% y-o-y), but this was partly offset by NIM compression of 23bps q-o-q (due to lower LDR as both Malaysia and CIMB Niaga built up liquidity) and 22bps y-o-y (due to dilution from asset yield). Meanwhile, non-interest income was up 9% q-o-q (+1% y-o-y) mainly due to lower mtm losses from derivatives. Ex-restructuring charges, overheads rose 3% q-o-q and 13% y-o-y, although the y-o-y rise mainly reflects the consolidation of RBS’ overheads (+6% y-o-y, ex-RBS costs). Loan impairment allowances stayed low with 1Q13 credit cost of 15bps (4Q12: 10bps; 1Q12: 30bps), significantly below the <40bps guidance.

-  Briefing highlights.  CIMB was optimistic that, on a full-year basis, the NIM contraction can be kept within the guided 5-10bps. The group’s loan pipeline remains healthy and there is headroom for a higher LDR. CIMB was also hopeful to keep CIR at around 55-56% for 2013. Overall, there was no change to the 16% ROE target.

- Forecasts. We tweaked down our FY13-14 EPS projections by 0.3-2.2%, after we model in potential new shares from the DRS.

-  Investment case. Apart from the above changes to our FY13-14 EPS projections, we have also rolled forward valuations to 2014. All-in, we have raised our fair value to MYR10.90 from MYR9.90, based on unchanged target PER of 15x. BUY call maintained.

Source: RHB