CIMB not likely affected by URUS measures
KUCHING: CIMB Group Holdings Bhd (CIMB) expects to see minimal impact from the Financial Management and Resilience Programme (URUS), as the interest waiver from URUS is expected to bring about a slight drag in net interest margins during the last quarter of financial year 2021 (4QFY21) and 1QFY22.
The group believes that the stringent criteria required by borrowers to qualify for URUS will limit any potential loss exposure.
Researchers with MIDF Amanah Investment Bank Bhd (MIDF Research) saw that CIMB expects a 15 to 20 basis point NIM expansion for FY21. To contextualise, only 27 per cent of Malaysian consumer loans are affected by the moratorium (as at June-21), with about 20 per cent involving B40 borrowers.
“With the group expecting about 50 per cent of these loans to be put under URUS, only 1.7 per cent of total gross loans is expected to be affected by the scheme,” it said
“The bank will set aside overlays for the effects of the URUS interest waiver, the majority of which will feed into 3QFY21 results rather than 4QFY21. Given the stringent criteria required for borrowers to qualify for URUS, we do not believe that this will result in a sizeable jump in total provisions.
“On that note, we still expect some overlay release to come in FY22. Recall that management overlay and macroeconomic factor provisions amounted to RM130 million in 1HFY21, while Covid-19 related provisions amounted to RM262 million.”
CIMB”s current account and savings account (CASA) volumes are sticky in the low interest rate environment, and the bank believes that it is unlikely to taper off anytime soon.
With the group still flushed with liquidity, it has opted to target specific segments — most notably, private banking—rather than a widespread rate hike in an effort to preserve its cost of funding.
“The group is still guiding for a total loan growth of two to three per cent in FY21. The group expects the strong loan growth rate to be sustained in Malaysia amid the more positive consumer outlook stemming from a loosening in pandemic restrictions.”
Meanwhile, Hong Leong Investment Bank BHd (HLIB Research) saw that loans outside of CIMB’s rescheduling and restructuring (R&R) packages were generally stable and did not see any asset quality deterioration.
Also, the group’s level R&R take up rate in 3Q21 stayed close to the preceding quarter’s 21 per cent; the uptick in Malaysia’s retail and commercial segments were largely offset by the drop at its corporate and other regional portfolio.
“That said, there will be management overlay provision top -up in 3Q21 to account for more potential troubled borrowers, analysed from the Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (Pemulih) data. Besides, from the tone of it, FY21 net credit cost of 80 to 90 basis points guidance should be largely intact, considering more granular provisions have been made and a bad legacy loan (relating to a local sugar company) may be recovered.”