The group’s annualized 9MFY12 earnings were largely in line with both our and consensus full-year estimates. Rolling forward our valuation metrics to FY13, we have raised our fair value to RM9.07 from RM8.53. Our new fair value is based on an implied FY13 PBV of 2.14x, ROE: 16.1%, COE: 9.6% and terminal growth rate of 4%. The stock’s current valuation of 1.8x FY13 PBV and 11.8x PER is relatively undemanding, Maintain BUY.
In line. The group’s annualized 9MFY12 earnings were in line with expectations, representing 77% and 74% of consensus and our full-year estimates respectively. However, the commendable result was partially due to a lumpy RM133m gain from recovery of impaired loans at CIMB Thai. Adjusting for the lumpy write-back, 9MFY12 results would came in marginally below our full-year estimates (5.2% below) as a result of integration cost from the RBS acquisition estimated at RM35m and a 18.8% q-o-q surge in staff cost arising from it, where revenue synergies have yet to flow through. Despite the surge in staff cost arising from RBS, overall group cost to income ratio remained steady at 56.1% as strong forex flow business from its treasury and markets division (+77.5% y-o-y and +18.7% q-o-q), which lifted overall non-interest income by 18.2% y-o-y, was sufficient to offset the higher cost base arising from the RBS acquisition estimated at 6% of overall group operating cost.
Commendable y-o-y core operating growth. 9MFY12 net profit expanded 12.5% y-o-y while 3Q12 net profit grew 2.9% q-o-q. Core pre-provision operating earnings, which exclude the lumpy RM133m gain from the lumpy write-back of impaired loans from CIMB Thai, grew by a relatively robust 13.3% y-o-y despite a 15.1% y-o-y increase in operating costs. Overall net interest income expanded 10.4% y-o-y with CIMB Niaga (+24.6%) and to a certain extent corporate wholesale banking (+7.2%) driving growth as Malaysian and Singapore consumer banking units chalked up a subdued collective net interest income growth of 4.0% y-o-y given the persistent net interest margin (NIM) pressure and moderating consumer loans growth.
CIMB Niaga and Group Treasury performed favourably. CIMB Niaga and CIMB Group Treasury were the star performers, registering respective PBT growth of 29.9% y-o-y and 77.5% y-o-y. Overall non-interest income growth of 18.2% was fueled by a robust 193.5% y-o-y growth in forex income largely in the form of sustainable customer flow business from greater cross selling initiatives of treasury hedging products across its regional wholesale banking customers. The increase in forex volatility and spreads has also played out positively for the group in terms of greater demand for forex hedging products and margins.
In line. The group’s annualized 9MFY12 earnings were in line with expectations, representing 77% and 74% of consensus and our full-year estimates respectively. However, the commendable result was partially due to a lumpy RM133m gain from recovery of impaired loans at CIMB Thai. Adjusting for the lumpy write-back, 9MFY12 results would came in marginally below our full-year estimates (5.2% below) as a result of integration cost from the RBS acquisition estimated at RM35m and a 18.8% q-o-q surge in staff cost arising from it, where revenue synergies have yet to flow through. Despite the surge in staff cost arising from RBS, overall group cost to income ratio remained steady at 56.1% as strong forex flow business from its treasury and markets division (+77.5% y-o-y and +18.7% q-o-q), which lifted overall non-interest income by 18.2% y-o-y, was sufficient to offset the higher cost base arising from the RBS acquisition estimated at 6% of overall group operating cost.
Commendable y-o-y core operating growth. 9MFY12 net profit expanded 12.5% y-o-y while 3Q12 net profit grew 2.9% q-o-q. Core pre-provision operating earnings, which exclude the lumpy RM133m gain from the lumpy write-back of impaired loans from CIMB Thai, grew by a relatively robust 13.3% y-o-y despite a 15.1% y-o-y increase in operating costs. Overall net interest income expanded 10.4% y-o-y with CIMB Niaga (+24.6%) and to a certain extent corporate wholesale banking (+7.2%) driving growth as Malaysian and Singapore consumer banking units chalked up a subdued collective net interest income growth of 4.0% y-o-y given the persistent net interest margin (NIM) pressure and moderating consumer loans growth.
CIMB Niaga and Group Treasury performed favourably. CIMB Niaga and CIMB Group Treasury were the star performers, registering respective PBT growth of 29.9% y-o-y and 77.5% y-o-y. Overall non-interest income growth of 18.2% was fueled by a robust 193.5% y-o-y growth in forex income largely in the form of sustainable customer flow business from greater cross selling initiatives of treasury hedging products across its regional wholesale banking customers. The increase in forex volatility and spreads has also played out positively for the group in terms of greater demand for forex hedging products and margins.
Loans growth moderates with consumer loans facing the brunt of the slowdown. Following 2Q12 relatively robust 5.2% q-o-q loans growth, 3Q12 sequential growth moderated sharply to +0.4%, bringing 9MFY12 annualized growth to 6.7% vs our 11% full year growth estimates partially attributed to depreciation of IDR, certain lumpy corporate repayment in the quarter and slowing consumer loans growth. However, this will be partially mitigated by a strong bond pipeline given the increasing traction on ETP projects. In terms of loans segment consumer was by far the weakest with mortgages and auto loans growing at an annualized pace of 6.5% and 6.6% respectively and credit cards declining 3.6%. Despite the lumpy corporate loan repayments in the quarter, group overall corporate loans’ grew 10.7% y-o-y far outpacing consumer loans growth.
Asset quality intact. The group’s asset quality remained largely intact, with absolute gross impaired loans declining 4.4% q-o-q and gross impaired loans ratio declining further to 4.2% from 4.4% in 2Q12. Indonesian loans portfolio registered a marked 15.3% q-o-q improvement in absolute impaired loans, while Malaysian operations witness a slight 2.1% q-o-q improvement. With overall credit cost rising to 16bps from 10bps in 2Q12 despite of an improving asset quality trend, loans loss coverage ratio increased further to 84% from 82% in 2Q12.
Raising fair value to RM9.07 – Maintain BUY. Rolling forward our valuation metrics to FY13, we have raised our fair value to RM9.07 from RM8.53. However, this also factor in a reduction in our ROE assumptions for FY13 to 16.1% from 16.8% as we reduce our dividend payout assumptions to only 40% from our original 50% given the possible guidance of a reduced payout assumption if Basel 3 capital deductions turns out to be more punitive than what management expects. Our new fair value is based on an implied FY13 PBV of 214x, COE: 9.6% and terminal growth rate of 4%. Current valuations of 1.8x FY13 PBV and 11.8x PER is relatively undemanding, Maintain BUY.
Source: OSK
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