KUALA LUMPUR, April 20: CIMB Group Holdings Bhd is expected to post a net profit of RM1.07 billion in its first quarter financial year 2022 (Q1FY22), scheduled for release on May 31.
RHB Research said this would be 22 per cent of its consensus projection for FY22.
‘’Growth of 25 per cent quarter-on-quarter (q-o-q) in core net profit would be driven mainly by lower provisions of -42 per cent q-o-q,’’ it said in a note today.
RHB Research said recent updates from an analyst meeting also suggested that there should be no negative surprises, particularly in the area of impairment charges, as there have been moderate improvements in underlying operations, and the management remains comfortable with its credit cost guidance.
Kenanga Research, however, worries over possibly of higher provisions amidst the ongoing double crediting issue and industry-specific headwinds.
To recall, the group has booked RM281 million provision concerning processing errors by CIMB’s MoneySend service in Q4FY21, comprising duplicated transactions due to limitations in its processing capabilities, which the group is actively rectifying.
‘’Steps are being taken to maximise the recoverability of these funds, but Q1FY22 could see additional allowances albeit not as severe as the RM281 million provision mentioned above,’’ it noted.
CIMB has also allocated RM2.2 billion worth of pre-emptive provisioning, which the management intends to utilise a share of its Malaysian bookings (RM1.1 billion) on delinquent accounts.
It believes these are for long-standing business as usual (BAU) which has demonstrated healthy repayment capabilities.
‘’Meanwhile, fluctuation in commodity prices may present a volatile operating environment for certain accounts that caution the group to maintain RM600 million in macroeconomic variable overlays.
‘’On the flipside, the management alluded that developments in the oil & gas scene may warrant further topping up of specific provisions,’’ Kenanga Research said.
Based on Q4FY21’s readings, 46 per cent of its oil & gas assets have been impaired, with Malaysia being the predominant region of the group’s exposure (74 per cent).
Post update, Kenanga Research said it has slashed FY22 earnings forecast by 5.0 per cent on higher credit cost assumptions from 50 basis points to 60 basis points to be in line with management’s guidance.
‘’We previously anticipated much less provisioning requirements but management’s remarks may warrant more conservative bookings,’’ it added.
Meanwhile, MIDF Research said CIMB’s net interest margins are expected to improve on a sequential quarter basis as cost of deposits remain stable while lending yields move up.
‘’The group is a bit more conservative on its outlook as it expects pockets of competition in the coming quarters.
‘’CIMB will be keeping its Q4FY21 strategy, where it will only compete for deposits in certain segments with significant cross-selling opportunities,’’ it said.
Similarly, it projects non-interest income to improve on a sequential quarter basis.
‘’Although fee income remains flattish, trading income has improved. The brunt of losses from market volatility as unrealised gains will not be reflected in its Q1FF22 earnings,’’ it said. – TVS
