Monday, 21 January 2013

CIMB Group Holdings - Normalised earnings for CIMB Thai’s 4Q BUY


-  CIMB Group Holdings Bhd’s (CIMB) 93.15%-owned subsidiary CIMB Thai Bank plc (CIMB Thai) registered a more normalised net earnings of THB155.6mil in 4QFY12, compared with the chunky net earnings of THB1,048mil in 3QFY12 (2QFY12: THB33mil). This was on the absence of exceptional gains from the sale of NPL via government-owned Thai Asset Management Corporation (TAMC). The gain from sale was circa THB1.3bil which was recognised in 3QFY12. 

-  Loans growth picked up with a 9.7% QoQ and 16.8% YoY increase in 4QFY12, higher than 3QFY12’s 8.6% QoQ. The growth came largely from the retail segment. Deposit growth was strong as well at 8.7% QoQ and 33.0% YoY. 

-  NIM seems to have stabilised on a QoQ basis, with an estimated NIM of 3.16% in 4QFY12 or a mere 4bps drop QoQ. This may be due to a higher utilisation of loan-to-deposit ratio (LDR) at 95.0% in 4QFY12 (3QFY12: 90.7%), although NIM seems to be well-sustained, if considering that growth came largely from the retail loan segment. Fee income was healthy (+31.7% QoQ), attributed to corporate finance and advisory fees. 

-  Gross NPL was reduced substantially by 12.2% QoQ, which the company attributed to continued resolution efforts and improved collection process. Gross NPL ratio has thus come down to 2.8% in 4QFY12 from 3.5% in 3QFY12. 

-  Loan loss provision was much lower at THB327mil in 4QFY12, compared with THB813mil in 3QFY12.  Credit cost came in at an estimated 96bps in 4QFY12 (3QFY12: 254bps, 2QFY12: 35bps). However, loan loss cover came in lower on a QoQ basis at 85.1% in 4QFY12 compared with 88.7% in 3QFY12. Thus, we believe this was likely due to write-offs.  Nevertheless, the overall asset quality has improved as there appears to be no longer any lingering effects from the floods slightly more than year ago.  

-  The 4QFY12’s results indicate some pick-up in loans growth, with a surprisingly stable NIM. Asset quality has also improved, which is positive. CIMB Thai’s net earnings contribution to CIMB is estimated at 1.4% in 4QFY12 (3QFY12: 9.4%, 2QFY12: 0.3%). Yearly net earnings contributions were at 3.7% in FY12F vs. 3.3% in FY11. Thus, overall, CIMB Thai is still not a major contributor although operationally it is on the right track. Maintain BUY on CIMB.

Source: AmeSecurities 

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