KUALA LUMPUR: CIMB Group Holdings Bhd expected to experience healthy loan growth with widening net interest margin (NIM).
The bank should also record stable asset quality and contained costs, according to RHB Investment Bank.
CIMB recently updated analysts ahead of its upcoming second quarter results which would be released on August 30.
“Management expects the overnight policy rate (OPR) to normalize to pre-pandemic levels. As the increase is expected to be gradual, management believes that borrowers will have sufficient runway to adjust to rising interest rates,” RHB said in its report.
“There is no discernible impact from the RPO increases at this time, but management is cautious and expects some impact on demand and asset quality in the fourth quarter of this year through first quarter of 2023,” the research house added.
RHB said underlying loan demand is healthy, supported by the reopening of borders in Malaysia, Indonesia and Thailand.
“CIMB continues to see lending opportunities in residential mortgages, auto finance and business banking,” he noted.
Meanwhile, Hong Leong Investment Bank Research (HLIB) noted that CIMB aims to maintain as many precautionary provisions as possible instead of reducing them, given the macro headwinds.
HLIB also said there would be an increase in macro variable provisioning in the second quarter, but this should be offset by some management overlay consumption in its merchant banking segment.
“The sequential NIM should grow, thanks to the increase in the OPR in May. Also, the local cost of funds is expected to remain fairly stable due to rational competition on deposits,” HLIB said.
The research house also said CIMB’s loan growth momentum in the second quarter was robust and the possible drag effect from RPO increases had not surfaced.
HLIB is keeping its guidance for CIMB unchanged as underlying operational trends in the second quarter were in line with expectations.
It retained its “pending” call and a target price based on the Gordon Growth Model of RM5.65, based on a forecast of 0.90x for the price-to-book ratio in fiscal year 2023 .
Meanwhile, UOB Kay Hian Research (UOBKH) said CIMB’s overall acceptance rate of loans under targeted assistance fell from 5% at the end of May 22 to 4%, against an average 3% during the pre-pandemic period. missed monitoring payments at 3% to 4% of loans under repayment assistance. This is largely due to the improvement in the repayment assistance level of its Malaysian consumer portfolio from 4% to 2%,” said UOBKH Research.
He also noted that CIMB management had also hinted that the gross impaired loan ratio remains fairly benign even as the loan moratorium continues to unfold.