KUALA LUMPUR (Feb 28): HwangDBS Vickers Research said CIMB Group Holdings Bhd’s 4Q11 earnings were in line.
It said on Tuesday the higher provisions on-quarter were offset by one-off recoveries (RM100 million from CIMB Thai) and gain from de-consolidation of CIMB Aviva (RM250 million).
HDBSVR said the RM250 million gain was fully offset by additional provisions, including a change in default probability for its Malaysian retail business under FRS 139.
“Corporate investment banking profits fell in the absence of mega deals in 2011, but the pipeline is expected to be strong this year. NIM was stable on-quarter but weakened on-year because of higher funding costs,” it said.
HDBSVR said loans grew 4% on-quarter to take full year loan growth to 14%, but that was below management’s 18% target.
Deposits grew 11% largely driven by Malaysian and Singapore operations, while CASA to total deposits inched up to 35% (FY10: 33%). Costs were stable with reductions largely in establishment, marketing and general expenses. Asset quality continued to improve with absolute NPLs dropping by 5%, while gross NPL ratio fell to 5.1%. Capital ratios (group level) under Basel III would be as follows: 8.4% core Tier-1 CAR, 9% Tier-1 CAR, and 15% RWCAR.
“Lingering external headwinds dictates a still cautious outlook for CIMB. It has guided for 16% loan growth for 2012, led by Malaysian and Indonesian operations (high-teens growth). Corporate loans should be the main growth driver as key ETP projects kick-off. A rights issue at CIMB Thai is on the cards to fund growth, but there are no details.
“Maintain Hold and RM7.60 TP based on the Gordon Growth Model and 16.5% ROE, 6.5% growth, and 11% cost of equity. FY12/13F earnings are revised by 3%-4% after adjusting for FY11 result,” it said.
It said on Tuesday the higher provisions on-quarter were offset by one-off recoveries (RM100 million from CIMB Thai) and gain from de-consolidation of CIMB Aviva (RM250 million).
HDBSVR said the RM250 million gain was fully offset by additional provisions, including a change in default probability for its Malaysian retail business under FRS 139.
“Corporate investment banking profits fell in the absence of mega deals in 2011, but the pipeline is expected to be strong this year. NIM was stable on-quarter but weakened on-year because of higher funding costs,” it said.
HDBSVR said loans grew 4% on-quarter to take full year loan growth to 14%, but that was below management’s 18% target.
Deposits grew 11% largely driven by Malaysian and Singapore operations, while CASA to total deposits inched up to 35% (FY10: 33%). Costs were stable with reductions largely in establishment, marketing and general expenses. Asset quality continued to improve with absolute NPLs dropping by 5%, while gross NPL ratio fell to 5.1%. Capital ratios (group level) under Basel III would be as follows: 8.4% core Tier-1 CAR, 9% Tier-1 CAR, and 15% RWCAR.
“Lingering external headwinds dictates a still cautious outlook for CIMB. It has guided for 16% loan growth for 2012, led by Malaysian and Indonesian operations (high-teens growth). Corporate loans should be the main growth driver as key ETP projects kick-off. A rights issue at CIMB Thai is on the cards to fund growth, but there are no details.
“Maintain Hold and RM7.60 TP based on the Gordon Growth Model and 16.5% ROE, 6.5% growth, and 11% cost of equity. FY12/13F earnings are revised by 3%-4% after adjusting for FY11 result,” it said.
