CIMB’s upcoming 2Q18 earnings to remain steady
KUCHING: CIMB Group Holdings Bhd (CIMB) will not likely record a significant change in its financial performance for its upcoming second quarter of 2018 ( 2Q18), but Affin Hwang Investment Bank Bhd (Affin Hwang) believes that earnings will remain steady.
According to Affin Hwang, CIMB expected that chances of the bank achieving the group’s loan growth target of six per cent (at group level) remained good due to a better outlook in Malaysia.
The research firm noted that it might even exceed target on potential pick-up in corporates, small and medium enterprises (SMEs) and mortgages.
“Loan growth in Singapore is also picking up while the environment remains challenging in Thailand and Indonesia due to upcoming elections,” the research firm said.
“Management’s mid single-digit target for Indonesia may be challenged due to a lack of demand in the corporate and SME space though retail loans (mortgages) are growing at a high single- digit,” it added.
On group level provisions, Affin Hwang expected it to ease quarter on quarter (q-o-q) and year on year (y- o-y).
Affin Hwang projected that Malaysia, Indonesia and Thailand are likely to have performed better in 2Q18, given that no new major accounts became non-performing loans ( NPLs) while some recoveries are expected.
The research firm pointed out that CIMB Niaga’s credit cost was tracking down towards the 150 basis points (bps) level in 2Q18, compared to 179bps in 1Q18.
“Management maintained its credit cost guidance of 55 to 60bps,” it noted.
Affin Hwang highlighted that CIMB also maintained its guidance for a five to 10bps contraction in the net interest margin ( NIM) for 2018, driven by CIMB Niaga’s weaker NIM outlook ( potentially down 50bps to circa five per cent in 2018), while the outlook is expected to be steady in Malaysia, Thailand and Singapore.
“Non-interest income may have seen some pressure from a shortfall from fixed income activities, but this may be temporary owing to the slowdown in capital markets in 2Q18,” it added.
Meanwhile, during the weekend, CIMB’s chief executive officer Tengku Datuk Seri Zafrul Aziz affirmed that CIMB’s loan growth to remain at between six and seven per cent this year, in line with the industry’s growth projection.