4Q21 results within expectations
Maintain HOLD
We lower FY22/23E net profit by 11%/5% on lower NIM and higher credit cost assumptions. Our FY22E ROE of 7.5% is at the lower end of management’s target of 7.5-8%. We roll forward valuations to FY23 and lift our TP by 20sen to MYR5.60 (FY23 PBV of 0.9x, ROE: 9%). Maintain a HOLD.
Within expectations
CIMB’s 4Q21 core net profit of MYR811m (-34% QoQ) took FY21 net profit to MYR4.6b (+225%). The results were within both our expectation and consensus. Loan growth was a subdued 3% but NIM expanded 18bps YoY. Stripping out one-offs, FY21 NOII was flat, while operating expenses rose 5% YoY. A second interim DPS of 12.55sen has been declared, taking the total to 23sen, or a payout ratio of 50%.
Credit cost expected to remain elevated
Credit cost was 84bps in 4Q21 versus 62bps in 3Q21. Credit cost averaged 73bps in FY21 versus 151bps in FY20. Management maintains elevated credit cost guidance of 70bps in FY22, mainly on corporate loans as well as elevated credit cost of 50-60bps into FY23-24.
Earnings lowered
Management targets faster loan growth of 5-6% in FY22, expects NIM to be flat, with the possibility of up to a 10bps compression, and is aiming for a CIR of <49bps. It targets an ROE of 7.5-8% for FY22, including Cukai Makmur. Excluding Cukai Makmur, the ROE would be a higher 8.5-9%. We cut FY22 earnings by 11%, and FY23 by 5%, on the back of NIM compression (-5bps in FY22) and higher credit cost (70bps in FY22, 50bps in FY23) assumptions. Our ROE of 7.5% for FY22E is at the lower end of management’s target of 7.5-8%, but we expect an improvement to 9.0% in FY23E.