CIMB Thai’s 6M17 results leave analysts confident
KUCHING: CIMB Thailand’s (CIMB Thai) results for the first six months of financial year 2017 (6M17) saw a 30.1 per cent improvement year over year (y-o-y) in its net profit, leaving industry analysts positive on its performance for the rest of its year.
In a Bursa filing on Wednesday, CIMB Group Holdings Bhd (CIMB) who owns 94.11 per cent of the Thai group announced that CIMB Thai had achieved the improved net profit of 477.8 million baht, on the back of a 2.0 and 17.2 per cent y-o-y lower operating expenses and provisions, respectively.
Breaking down the improvement in provisions, the team over at MIDF Amanah Investment Bank Bhd (MIDF Research) opined that its downtrend would likely to continue and noted that the underlying cause was due to an improving Non-Performing Loan (NPL) ratio.
“While gross NPL ratio stood at 5.4 per cent, which was higher than the 4.3 per cent registered as at 6M17, it was an improvement from the 6.1 per cent posted as at 4QFY16.
“The lower NPL ratio was mainly due to the sale of some NPLs in the 1QFY17, more efficient risk management policies, continued resolution of its NPLS and improvements in loan collection processes,” explained the research arm.
Adding to this, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) has also highlighted that the banks’ loan loss coverage ratio has fell by 7 points to 84 per cent while total provision stood at 9.5 billion baht – translating to a 3.3 billion baht excess over the Bank of Thailand’s reserve requirements.
With the downtrend of lower provisions expected to continue for CIMB Thai and steadying asset quality, both analysts are expecting that the bank will turn positive for FY17 after posting a net loss of 629.5 million baht or RM79.11 million in FY16.
“Our view is that CIMB Thai will turn positive for FY17, with lower provisions given that loan loss provisioning is expected to peak by then,” guided Kenanga Research, adding that profitability of the bank would also be sustained by corporate cash flows improvements from anticipated stabilising economy.
This is in line with the banks own expectations as its president and chief executive officer Kittiphun Anustarasoti was quoted in a statement to have said, “Our half year performance was satisfactory.
Net profit improved due to better NIM and lower operating expenses and provisions whilst operating income held relatively steady.
“Gross loans contracted slightly due to general corporate loan repayment and portfolio recalibration.
“Asset quality has also improved. Our consumer, wholesale and treasury businesses performed well and Commercial has shown positive growth traction post recalibration.
“We are on track to turn profitable in FY2017.”
The bank’s loan growth target of 5 to 10 per cent is however expected to be too ambitious as both analysts are expecting a flatting growth as low interest rates (+1.5 per cent) and low inflation with government spending and tourism is expected to support the sluggish economy in 2017.
All things considered, both analysts are expecting CIMB Thai who has contributed circa 6 per cent to the overall earnings of the CIMB Group to be a positive contributor to it in FY17.