CIMB on track to meet most FY18 KPI targets except for loan growth — Analysts
KUCHING: CIMB Group Holdings Bhd (CIMB) is on track to meet most of the group’s financial year 2018 (FY18) key performance indicator (KPI) targets with the exception of its loan growth, AmInvestment Bank Bhd’s (AmInvestment Bank) research analysts gathered following a recent meeting with the management for some updates.
According to AmInvestment Bank, CIMB Malaysia’s loans are growing above the industry average but this is likely to be dampened by the slower loan growth of its overseas operations (Indonesia and Thailand).
“The group has a target for Malaysia loans to grow by six to seven per cent,” the research firm said.
“Meanwhile, loan growth in Indonesia has lagged behind its target of five per cent, impacted partly by the contraction in auto loans due to its strategy to recalibrate loans in this segment for better asset quality.”
AmInvestment Bank highlighted that with the group’s new mortgage loans in Malaysia, the loanto-value ( LTV) ranges between 85 per cent and 90 per cent.
The research firm further highlighted that average LTV for its mortgage loans is circa 63 per cent.
“We understand that the growth in the mortgage loans in Malaysia is mainly on loans with the size of between RM300,000 and RM800,000.”
AmInvestment Bank noted that in Thailand, there is still work to be done for CIMB’s small and medium enterprise ( SME) business while in Indonesia, work is in progress to clean up the group’s auto loan portfolio (restructuring).
It also noted that the recalibration of the group’s auto loan book will continue until the end of FY18.
“Management sees room for digitalisation to automate task and improve its work processes,” AmInvestment Bank said.
“This will be key to lower its cost-incom (CI) ratio from 50 per cent targeted in FY18 to the mid40s in the future.”
The research firm added that potentially further digitalisation initiatives could be rolled out regionally in the second half of FY18 (2HFY18).
AmInvestment Bank recalled that the group’s deal with China Galaxy Securities to dispose of 50 per cent of the equity broking business under CIMB Securities International was completed on January 18 and is likely to results in a one- off gain of circa RM150 million which will be recognized in the group’s first quarter of FY18 (1QFY18) results.
“Meanwhile, for its divestments in stakes in CIMB-Principal Asset Management ( CPAM), the deal is expected to be completed in 2QFY18.
“It will result in a gain of RM950 million (one-third is realised gains and two-thirds are revaluation of the group’s remaining 40 per cent stake in CPAM).”
AmInvestment Bank went on to note that management continues to guide for a net interest margin ( NIM) compression of five to 10 basis points ( bps) in FY18.
“Contributing factors will be due to pressure on Indonesia’s asset yield as well as due to the structural compression from newer mortgage loans with lower rates that will replace the older ones.
“Meanwhile, NIM in Thailand will be flat or slightly lower while that in Malaysia is expected to rise initially due to the OPR hike and then taper off with the reprising of liabilities.
“Management is seeing more pressure on liabilities compared to assets.”
AmInvestment Bank gathered than the group’s fee income has been decent but the market-related income has yet to gain significant traction despite the pipeline deals.
“On the credit cost run rate postMFRS 9, we understand that it is likely to be close to the guided 55 to 60 bps for FY18.”