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Keep BUY and MYR6.40 TP, 24% upside with c.4% yield. 1Q22’s results beat expectations, with strong topline growth, sustained cost controls, and significantly lower provisions being key standouts. Loan growth is gaining pace while the structured cost take-outs have also led to further improvement in CIR. Should asset quality continue to hold up in the quarters ahead, potential lowering of credit cost guidance presents upside risk to earnings. The healthy improvement in underlying operations, we believe, provides catalyst for positive share price re-rating.
1Q22 results above. Net profit of MYR1,427m (-42% YoY, +67% QoQ) accounted for 29% of our and consensus’ FY22F earnings. Excluding exceptional items and Cukai Makmur, core earnings were MYR1,550m (Figures 1 and 2), up 16% YoY and 91% QoQ. Reported ROAE of 9.6% is above FY22F’s 7.5-8% target. CET-1 ratio a healthy 14.5% vs the target of >13%.
Key 1Q22 trends. Core PIOP jumped 13% QoQ, led by a 12% QoQ rise in non-II and seasonally lower opex (-6% QoQ), which saw CIR falling to a low of 47% (4Q21: 51.6%). NII was flattish QoQ, mainly due to lower asset yield. Non-II was lifted by the 48% QoQ rise in trading and FX incomes, which offset the 5% drop in fees and other income. Core net profit was up a sharp 91% QoQ as total impairment charges fell 63% QoQ – this was as underlying provisions normalised and a MYR83m top-up for oil & gas exposures were offset by write-backs of management overlays and recoveries of legacy GILs. CIMB also took full and final provision of c.MYR186m (4Q21: MYR281m) for the double crediting of customers in late 2021. Loan credit cost was 34bps vs guidance of 60-70bps for FY22 (see Figures 1-3 for details).
FY22 guidance. Loan growth trajectory continued to improve, rising to +1.8% QoQ (4Q21: +1.5%). Annualised loan growth of 7.2% is above the 5-6% target for FY22. Management is pleased with the positive results from efforts to reshape the group’s loan portfolio over the past two years. NIM ticked up 4bps QoQ to 2.45%, with the improvement coming mainly from Malaysia. Given the earlier-than-expected rise in policy rate, CIMB now expects NIM to be stable to 5bps higher in FY22F – a revision from earlier expectations of stable to -10bps. With asset quality trending better than expected, management does not see the need for further overlays in the quarters ahead. That said, credit cost guidance is unchanged for now, given the rising economic headwinds and geopolitical tensions. CIMB expects to provide better guidance in 3Q22.
Earnings and TP. We make no changes to our earnings forecasts as we await further guidance from management. Our TP is unchanged at MYR6.40 based on GGM-derived intrinsic value of MYR6.42. With an ESG score at 3.0 out of 4, which is in line with country median, the ESG premium/discount is 0%. The ESG score is derived based on our proprietary in-house methodology.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....