KUCHING: CIMB Group Holdings Bhd’s (CIMB) first quarter of 2016 (1Q16) results have come in line with analysts’ expectations. In a press release, CIMB reported a profit before tax of RM1.123 billion for 1Q16, 9.5 per cent higher year on year (y-o-y), in tandem with a 13.2 per cent y-o-y decline in loan provisions. The group said that on a y-o-y basis, the net profit of RM814 million improved 4.1 per cent compared to the business as usual (BAU) 1Q15 net profit of RM782 million. According to the research arm of TA Securities Holdings Bhd (TA Research), while results came largely in line with its and consensus’ expectations, it accounted for 22 per cent and 21 per cent of full year estimates respectively. TA Research noted that return on equity (ROE) stood at 7.9 per cent, below management’s target of 10 per cent. The research arm forecasted ROE of 8.9 per cent for financial year 2016 (FY16). CIMB’s 1Q16 core earnings were also in line with the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) expectations, accounting for 25 per cent/21 per cent of its/consensus estimates. “No dividends announced as expected,” Kenanga Research said. On the outlook for CIMB, Kenanga Research noted that overall, management expects a slower environment for CIMB Malaysia but gradual improvement in Indonesia and Thailand. The research arm further noted that management has highlighted before that so far there are no signs of stress in any of CIMB’s portfolios but remain watchful for signs of asset deterioration. As for net interest margins (NIMs), Kenanga Research highlighted that management maintained a five to 10 basis points (bps) compression. The research arm pointed out that as management emphasised on cost management and asset quality, CIMB reiterated the group’s targets for FY16 including credit charge ratio of 60 to 70bps, cost-income ratio (CIR) below 53 per cent, total loans growth of 10 per cent and ROE to come in around 10 per cent. Kenanga Research made no changes in the research arm’s assumptions for FY16E and maintained its FY17E assumptions with ROE to come in at around 7.7 per cent/8.3 per cent for FY16/FY17, loans growth of nine per cent for both FY16/FY17, deposits growth around 10 per cent for both years, credit costs of around 69bps/65bps for FY16/FY17 and CIR at around 58 per cent/56 per cent. Meanwhile, TA Research noted that despite better results, most of management’s targets for 2016 were not met. Nevertheless, the research arm believed earnings should pick up throughout the remaining part of the year. “Consumer and Commercial Banking operations should gain traction on the back of T18 initiatives that will drive revenue growth and improve customer satisfaction. “Continued cost management initiatives to drive internal efficiency will help give some buffer to earnings,” it said. TA Research has nevertheless noted that management expects Wholesale Banking to remain challenged by the volatile markets. In FY16, the research arm foresaw the focus on capital management and asset quality, which will be intensified across business lines and geographies, especially in Indonesia and Thailand. “That said, management will maintain its cautious stance on loans growth given weak economies and uncertain markets,” the research arm said. All in, TA Research maintained ‘buy’ on CIMB on the back of attractive valuations. Previously, the research arm applied a 0.9-fold FY16E P/B where it utilised COE of 8.3 per cent, FY16E ROE of 7.7 per cent, and terminal growth of three per cent. As there was only a nine per cent upside to its target price, Kenanga Research upgraded its call to ‘market perform’. Facebook Messenger Twitter WhatsApp Email Print
CIMB - estimated net profit $ 1.12bn ( $ 270 m ) , up 9 % YoY , and in line with expectations