KUALA LUMPUR (Nov 1): CGS-CIMB Research estimated that "Cukai Makmur" will lower banks’ total net profit for financial year 2022 (FY22) by 9%, with AMMB Holdings Bhd appearing to be the hardest hit.
CGS-CIMB analyst Winson Ng said in a note on Monday (Nov 1) that the tax will have a negative impact on banks’ net profit as he forecast pre-tax profit of more than RM100 million for all banks for FY22.
Cukai Makmur is a one-off tax measure introduced by the federal government in Budget 2022, whereby earnings above the RM100 million mark will be taxed at a rate of 33% instead of the blanket 24% rate previously.
According to Ng, AMMB will be the hardest hit as he forecast a negative impact of 11.1% on its FY22 net profit.
He assumed 100% of AMMB's FY22 pre-tax profit to be generated from its Malaysian entities, the largest among the bigger banks.
“Our projected FY22 pre-tax profit of RM2 billion for AMMB is much higher than that for the two smaller banks — RM650.3 million for Affin Bank Bhd and RM565.3 million for Alliance Bank Malaysia Bhd,” he said.
In his view, Malayan Banking Bhd (Maybank) will be the least affected as he estimated a 7% negative impact on the projected FY22 net profit for the bank.
He assumed that 39% of Maybank's FY22 pre-tax profit will be generated from the overseas market and hence not affected by Cukai Makmur.
While seeing downside risk from the higher tax rate for banks in FY22 arising from Cukai Makmur, Ng said banking stocks could see selling pressure.
However, he maintained his "overweight" call on the banks given the potential rerating catalyst from his projected core net profit growth of 7.3% for FY22.
He also estimated that the banks’ loan loss provisioning for the third quarter (3QFY21) increased quarter-on-quarter but declined year-on-year (y-o-y), which was positive for the banks’ y-o-y net profit growth in 3QFY21.
His top picks for the sector are Public Bank Bhd (target price [TP]: RM4.80), Maybank (TP: RM9.10) and Hong Leong Bank Bhd (TP: RM20.78).
Spooked by the special windfall tax, the Financial Services Index fell 2.82% to 15,149.58 at Monday's noon break.
Hong Leong slipped 54 sen or 2.93% to RM17.92, RHB Bank Bhd shed 25 sen or 4.48% to RM5.33, CIMB Group Holdings Bhd lost 20 sen or 3.83% to RM5.02 and AMMB reduced 16 sen or 4.76% to RM3.20.
Meanwhile, Public Bank dropped by 13 sen or 3.12% to RM4.04, while Maybank tumbled six sen or 0.75% to RM7.99.
See more Budget 2022 highlights here.