KUALA LUMPUR, January 19 ― CIMB Group Bhd expects its loan growth in 2022 to exceed that of 2021.
However, loan 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 funding portfolio in the two countries, AmInvestment Bank said in a note today.
Nonetheless, it maintained its “buy” call on CIMB, with an unchanged fair value of RM6.20 per share based on a return on equity (ROE) of 9.8% in FY2022 (FY22 ), noting that foreign ownership in the stock rose to 24.7% in December 2021 from a low of 20.3% in May 2021.
In the meantime, he does not foresee any significant increase in management overlays for the CIMB Loan Repayment Assistance Program (URUS).
He said conservative provisions had already been built up through additional management overlays in FY20 and FY21, while the group now had better visibility into risky segments of its loan book.
“We understand that requests for URUS have increased since November 2021, however, the total amount of loans for which borrowers have requested URUS on an absolute value basis has so far been insignificant; less than 1.0% of Malaysia’s total consumer loans.
“Management has hinted at a possible resumption of URUS applications towards the end of the deadline (January 31, 2022). Nevertheless, we do not expect a large increase in URUS applications due to the stricter qualification criteria imposed on borrowers,” AmInvestment said.
RHB Research also maintained its “buy” call on CIMB, raising its target price by 14.3% to RM6.30, based on its expectation that the stock price will trend higher on the back of a healthy earnings growth in FY22-23 and at a still decent valuation.
“Although asset quality remains stable, the cost of credit is expected to remain high in the fourth quarter of 2021.
“This is due to new management overlays for URUS, a refresh of macro factors in expected credit loss, additional provisions for corporate accounts in Malaysia and Indonesia, and the accelerated reduction of its commercial portfolio. Thai,” he said in a research note. today.
Conversely, in a separate note, MIDF Research downgraded its call for the bank to “neutral” as it felt that CIMB has a number of near-term headwinds, including a high gross impaired loan ratio, heavy provisions and weak loan growth. .
Nonetheless, he noted that the bank’s long-term prospects remain intact ― higher ROE and return on capital employed following its sinking kitchen exercise, a streamlined loan portfolio following its current restructuring and a strong exposure to the regional market. ― Bernama