CIMB seen to achieve moderate loan growth

MIDF Research said CIMB’s current share price is “attractive” despite the challenges related to the banking group’s lumpy corporate exposure, asset quality, heavy provision and uncertainty over its double-crediting error.

PETALING JAYA: Despite short-term headwinds, CIMB Group Holdings Bhd’s current share price weakness offers an attractive buying opportunity.

Year-to-date, the share price is down by 7%.

MIDF Research said CIMB’s current share price is “attractive” despite the challenges related to the banking group’s lumpy corporate exposure, asset quality, heavy provision and uncertainty over its double-crediting error.

The research house upgraded its call to a “buy” from “neutral”, with a target price of RM5.55.

“Our target price is derived by pegging its financial year ending Dec 31, 2022 (FY22) book value per share to an unchanged price-to-book value of 0.95 times,” it added.

Similarly, Kenanga Research has also upgraded CIMB’s call to an “outperform” from “marketperform”.

It said that the share price represented a buying opportunity.

“We believe current price levels may present a buying opportunity for the stock with the softer sentiment arising from the recent ‘MoneySend’ issue which bears no long-lasting implications to the group, given that remedial measures are being implemented.

“Post update, the stock would register the strongest year-on-year earnings per share improvement amongst its peers (31% vs. 20%)” said the research house.

Earlier this year, a processing error by a remittance service ‘MoneySend’ caused fund transfers to customers to be wrongly credited twice.

To recover the duplicate payments, the bank earmarked and froze affected accounts.

However, after attending CIMB’s pre-first quarter ended March 31 (1Q22) results briefing, Kenanga Research cautioned that the bank faces possibly higher provisions amid the ongoing double crediting issue and industry-specific headwinds.

The group booked RM281mil provision concerning processing errors in 4Q21.

Meanwhile, RHB Research said CIMB would continue to see moderate loan growth, with a slight pick-up in 1Q22 on modest sequential growth in Malaysia, Indonesia and Singapore.

The research house added that another positive for CIMB was the stable cost of funds, translating into a sustained net interest margin in 1Q22.

RHB Research has forecast a net profit of RM1.07bil for 1Q22 for CIMB.

CIMB is scheduled to release its 1Q22 results on May 31.

Hong Leong Investment Bank also expects the group to record a “decent top-line” performance results, anticipating a stronger loan growth, better non-interest income on a quater-on-quarter basis and slippage in net interest margin.

“However, net credit cost or NCC should remain elevated, capping performance,” it said.