CIMB group expected to record decent earnings in 1Q22

By ASILA JALIL

CIMB Group’s earnings for the first quarter of 2022 (1Q22) is expected to be decent supported by higher loan growths. 

AmInvestment Bank research noted the group is scheduled to release its first quarter results on May 31, 2022. 

“1Q22 earnings are anticipated to be decent supported by higher loan growth with no negative surprises on provisions. Meanwhile, overhead expenses remain tightly managed,” it said in a note yesterday. 

The firm said the stock continues to trade at an undemanding valuation of 0.8 times price-to-book value (P/BV) while the dividend yield of 6.2% in financial year 2023 (FY23) is seen as supportive of its share price.

“We are positive on the improving fundamentals of the group with expectations of stronger earnings supported by higher operating income and lower provisions ahead,” it said. 

AmInvestment Bank maintained its Buy call on the group with an unchanged fair value of RM6.50 per share, pegging the stock to FY23 P/BV of 1 time and supported by an ROE of 9.7%. 

It said the group’s Indonesian subsidiary, Niaga, recorded a higher core profit of Rp1.2 trillion in 1Q22, up by 19.9% year-on-year (YoY). 

The improvement was driven by stronger operating income from an increase in non-interest income (NOII) and lower provisions.

Its net interest income slipped 1.8% YoY in the quarter under review due to compression in net interest margin (NIM) of 66 basis points to 4.46% in the quarter with lower loan yield.

“From 2Q22 onwards, Niaga’s NIM is likely to improve premised on: i) lower reversals of interest accruals for consumer and emerging business banking (EBB) loans with the end of repayment assistance; ii) increase in higher yielding auto loans; iii) potential materialisation of strong pipeline of corporate loan deals; and iv) further improvement in funding cost via a reduction of higher cost time deposits and growth in current account savings account (CASA) to optimise liabilities,” it said. 

It added Niaga’s loan growth trended higher in 1Q22 to 5.3% YoY in line with its target of 4.0–6.0% expansion for FY22. 

Niaga’s customer deposit growth accelerated to 18.6% YoY in 1Q22 underpinned by stronger CASA which grew 19.1% YoY. 

“We expect Niaga to register a stronger performance with an improved ROE in FY22 underpinned by stronger loan growth and NIM from the optimization of assets and liabilities as well as stable credit cost.”