CIMB Thai’s results broadly within expectations
KUCHING: CIMB Thai Bank PCL’s (CIMB Thai) net profit for the six months (6M) period ended June 30, 2021 (6M2021) decreased by 431.1 million Thai baht or 31.1 per cent year-on-year (y-o-y) to 954.8 million.
CIMB Thai Bank is 94.83 per cent indirectly-owned by CIMB Group Holdings Bhd’s (CIMB).
In a filing with Bursa Malaysia, president and chief executive officer Paul Wong Chee Kin said the lower net profit was mainly from the 19.1 per cent yo-y increase in expected credit losses, reflected by the elevated provisions from economic uncertainty and credit migration from customers affected by the Covid-19 pandemic.
He said in the same period, CIMB Thai Bank’s consolidated operating income decreased 644.2 million Thai baht or 8.1 per cent y-o-y to 7.28 billion Thai baht.
“The lower operating income was attributed to a 11.7 per cent drop in net interest income and 2.3 per cent decrease in other income, offset by a 8.9 per cent expansion in net fee and service income,” he said.
On a y-o-y basis, he said net fee and service income increased by 61.6 million Thai baht or 8.9 per cent, arising from higher insurance brokerage and underwriting income, while net interest income decreased by 672.5 million Thai baht or 11.7 per cent due to lower interest income on loans and hire purchase business from the lower credit expansion.
He said operating expenses decreased by 579.9 million Thai baht or 12.3 per cent largely due to better cost management and
better optimisation of resources and the cost to income ratio improved to 56.7 per cent in 6M2021 compared to 59.5 per cent in 6M2020.
Hong Leong Investment Bank Bhd (HLIB Research) saw that CIMB Thai’s results were broadly in line with its estimates, forming 45 per cent of full-year forecasts but was below consensus at 38 per cent.
“On a quarterly basis, net profit jumped 80 per cent given positive jaws (total income at eight per cent while opex dropped by one per cent) and lower bad loans provision by seven per cent.
“At the top, we note that net interest margin (NIM) widened by 24 basis points and noninterest income (NOII) increased 10 per cent, thanks to huge market-to-market gains.”
On a yearly basis, CIMB Thai’s doubling in bottom-line was due to total income rising by two per cent, while opex and loan loss allowances fell by nine per cent and eight per cent respectively.
Year to date, its higher impaired loan provision (19 per cent) and weaker total income by eight per cent have led earnings to decline by 31 per cent. Drag at the top was caused by loans and NIM contraction.
“Both net loans and deposits continued shrinking by 9.2 per cent and 5.8 per cent y-o-y respectively. That said, net loanto-deposit ratio remains elevated at 113 per cent. As for asset quality, gross non performing loans (NPL) ratio was unchanged q-o-q at 4.8 per cent.
“We expect CIMB Thai’s NIM to hold steady at current levels
since Bank of Thailand appears inclined to pause its monetary easing cycle, but instead preferring fiscal and credit measures to combat Covid-19 headwinds.
“Also, their plan to switch to lower-yielding but safer assets will prevent NIM from broadening further. Separately, loans growth is seen to remain tepid for now as Covid-19 related woes drag near-term performance but should pick up pace six to 12 months down the road.
“As for asset quality, Bank of Thailand’s move to allow suspension of debt repayment for two months from July onwards, coupled with the readiness to implement additional measures, will help to limit a significant deterioration in NPL ratio.”