Friday 29 Mar 2024
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KUALA LUMPUR (April 26): Analysts expect CIMB Group Holdings Bhd to see better performance in FY21, due to better net interest margin (NIM) and lower provisions.

MIDF Research’s analyst Imran Yassin Yusof said in a note today that after meeting with CIMB’s chief financial officer Khairul Rifaie last Friday (April 23), he expects to observe a gradual improvement from CIMB.

“While provisions will remain elevated, we expect better NIM and tight cost control will alleviate any pressure. Besides, we expect that provisions will be lower this year as compared to FY20. As such, we believe that FY21 will see better performance from the group as the situation improves given the vaccine rollout and rebound in gross domestic product,” said Imran.

He is maintaining CIMB’s earnings forecast at RM3.04 billion for FY21, RM4.98 billion for FY22, RM5.37 billion for FY23.  

With the recent share price retracement, Imran believes that it presents an opportunity to invest in an improving situation. As such, he is upgrading his call on CIMB to "trading buy" from "neutral", but is still maintaining its target price (TP) of RM4.50.

According to him, Khairul is guiding credit cost of between 80 to 90 basis points (bps), which is around his expectation of lower provisions in FY21 (versus FY20 credit cost of 146bps).

“However, this is still elevated when compared against pre-pandemic credit cost level of 40 to 50bps. We believe that this suggests that there is some potential weakness in asset quality and the group has yet to fully recover from the effect of the pandemic,” said Imran.

He also noted that Khairul expects a slight increase in the targeted repayment assistance programme as a percentage of its total loans book, with the increase coming from Singapore and the corporate segment in Malaysia.

“We are not surprised by this given that Malaysia reimposed the movement control order in 1QFY21. Nevertheless, we believe that the post loan moratorium period appears to be stable for now,” said Imran.

Recall that the targeted repayment assistance programme and rescheduled and restructured loan comprised 12% of its Malaysia total loans book and 15% of the group total loans book as at 4QFY20.

Meanwhile, TA Securities foresees CIMB’s 1QFY21 operating income to remain largely intact, underpinned by better year-on-year trading income.

“We also foresee firmer net interest income sequentially due to expectations of more stable NIM and loans growth,” it added

The research house maintained CIMB’s net profit forecast for FY21 at RM2.81 billion, RM3.73 billion for FY22, and RM4.53 billion for FY23.

“While we foresee overall operating income to remain quite flattish in FY21 due to poor visibility in macro environment especially with the recent rise in new Covid-19 cases, we foresee earnings to be supported by topline growth, better cost management and lower expected credit losses.

“With that, we are maintaining our loan growth assumption of 3.8% for FY21 (vs. CIMB’s target of 4% to 5%) and credit cost of around 83 bps (versus CIMB’s guidance of 80 to 90 bps),” it said.

TA Securities reiterated its "buy" call on CIMB and maintained its TP at RM4.90.

At 11.31am, CIMB fell five sen or 1.19% to RM4.14, valuing the group at RM41.96 billion.

Edited ByLam Jian Wyn
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