KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) has cut its earnings target for CIMB Group Holdings Bhd’s financial year estimates for 2020/21/22 by 31%/14%/14% respectively, in view of higher net interest margin (NIM) compression and higher credit costs.
In a research note today, Maybank IB said the banking group’s credit cost jumped 1.06% in the first quarter of 2020 (1Q20) from 0.66% in 4Q19 and 0.34% in 1Q19.
In 1Q20, the group put through a provision of about RM430 mil against an oil trader, which defaulted during the quarter.
It had also put through an additional provision of RM100 mil in Indonesia for a corporate in the wholesale sector.
“We expect a further lumpy provision of about RM500 mil in 2Q20 against another oil trader in Singapore; as such, investors are likely to remain cautious towards CIMB in the near term.
“CIMB Group’s management guides for credit cost of 100-120 basis points for FY20, which is more than double its original guidance of 40-50 basis points,” it added.
Meanwhile, MIDF Amanah Investment Bank Bhd said it was surprised by CIMB Group’s credit cost level in 1Q20, although its expected that the credit cost level might remain elevated this year due to some corporate failure in Singapore’s oil and gas sector.
However, looking ahead, this might indicate an improvement next year, it said in a research note today.
“We believe that this might have already been priced in, given its recent share price performance.
“In fact, it may have overshot in relation to its fundamentals; hence, there might be some trading opportunities premised upon the potential improvement next year,” it added. – May 27, 2020, Bernama
