CIMB EXPECTS LOAN GROWTH IN 2022 TO EXCEED GROWTH IN 2021

KUALA LUMPUR, Jan 19 - CIMB Group Bhd is expecting its loans growth in 2022 to exceed the growth in 2021.

However, loans growth for Thailand and Indonesia is expected to be below the industry rate in the first half of 2022 (1H22) due to the recalibration of the bank’s financing portfolio in the two countries, said AmInvestment Bank in a note today.

Nevertheless, it has maintained its "buy" call on CIMB, with an unchanged fair value of RM6.20 per share based on financial year 2022’s (FY22) return on equity (ROE) of 9.8 per cent, noting that foreign shareholdings of the stock rose to 24.7 per cent in December 2021 versus a low of 20.3 per cent in May 2021.

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Meanwhile, it foresees no significant increase in management overlays from CIMB's loan repayment assistance programme (URUS). 

It said conservative provisions have already been set aside via top-ups of management overlays in FY20 and FY21, while the group now has better visibility on the risk segments of its loan book.

"We understand that applications for URUS have risen since November 2021, however, the total amount of loans where borrowers have applied for URUS on an absolute value basis has so far been insignificant; below 1.0 per cent of Malaysia’s total consumer loans. 

"Management alluded to a potential pick-up in applications for URUS towards the end of the deadline (Jan 31, 2022). Nevertheless, we do not anticipate a sharp rise in applications for URUS due to the stricter qualifying criteria on borrowers," AmInvestment said. 

RHB Research has also maintained its "buy" call on CIMB, raising its target price by 14.3 per cent to RM6.30, premised on its expectation that the share price would trend higher on healthy earnings growth in FY22-23 and still decent valuation. 

“Although asset quality remains stable, credit cost is expected to stay elevated in the fourth quarter of 2021.

“This is due to further management overlays for URUS, a refresh of macroeconomic factors in the expected credit loss, additional provisions for corporate accounts in Malaysia and Indonesia, and accelerated run-down of its Thai commercial book,” it said in a research note today.

Conversely, in a separate note, MIDF Research has downgraded its call on the bank to "neutral" as it opined that CIMB has a number of headwinds in the short term, most notably a high gross impaired loan ratio, heavy provisions and weak loan growth.

Nevertheless, it noted that the bank’s long-term prospects remain intact -- higher ROE and return on capital employed as result of its kitchen-sinking exercise, a streamlined loan portfolio following its current restructuring, and heavy exposure to the regional market. 

-- BERNAMA