- CIMB Group Holdings Bhd’s (CIMB) 93.15%-owned Thailand
subsidiary CIMB Thai Bank plc (CIMB Thai) recorded net earnings of THB344mil in
1QFY12 – an 18% QoQ drop from 4QFY11’s THB417mil.
- However, 4QFY11 included a couple of one-off items. First
was the gain of THB1,101mil from the share of gain of NPL sale from the
government-owned Thai Asset Management Corporation (TAMC), which was set up in
2001 to deal with non-performing loans (NPL) of the Thai banking industry
arising from the 1997-1998 crisis. Secondly, CIMB Thai also raised loan loss provision
substantially to THB790mil in 4QFY11, from THB124mil in 3QFY11, partly due to
clean-up provisioning (circa THB500mil) and partly to raise its general
provision rate from below 1% to 1.2%, in line with the industry average.
- Thus, the 1QFY12 earnings reflect a more normalised trend
if compared to 4QFY11. We estimate net earnings in Ringgit terms at RM35mil,
which would mean a contribution of 2.9% at the pre-tax level and 3.5% at the
net earnings level if based on our group pro-rated forecasts for 1QFY12F.
Overall, CIMB Thai’s earnings are in line with our estimates.
- Loans posted a decline of 0.7% QoQ, which we believe was
due to a time lag in dealing with the flood situation in Thailand. However, we
understand that loans have picked up recently. Deposit grew 7.8% QoQ. LDR
(including bills of exchange) eased to 88.0% in 1QFY12 from 88.8% in
4QFY11.
- Gross non-performing loans (NPL) increased slightly QoQ to
THB4.3bil in 1QFY12 from THB4.1bil, attributed to deterioration in credit
quality of certain sizable corporate accounts. We believe this was related to
the floods. The NPL is also distorted by certain borrowers who took up the loan
repayment moratorium that was granted due to the flood situation, but who, we
believe, would now need to resume repayments. CIMB Thai’s loan loss provision
is now more normalised at THB140mil in 1QFY12, leading to estimated credit
costs of 46bps (4QFY11: 267bps).
- Based on 1QFY12 results, we believe that CIMB Thai’s
operations remain soft, with a likely ongoing impact from the floods. However,
CIMB Thai’s contribution to overall group remains small. Thus, we do not expect
much of an impact on CIMB’s share price. We maintain BUY on CIMB with fair
value of RM8.00.
Source: AmeSecurities
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