Maybank IB maintains 'buy' call on CIMB Group

The call was made in view of the group's likely decent first quarter 2021 (Q1 2021) results amidst better net interest margins (NIM) and trading income.

In a note today, the research house said PT Bank CIMB Niaga and CIMB Group's Q1 2021 results are scheduled to be released on April 29 and May 31, respectively.

"We think that the results are likely to be decent for the group, with higher quarter-on-quarter (q-o-q) NIMs, better year-on year (y-o-y) trading income and ongoing cost control, offset by still elevated credit costs," it said.

Maybank IB noted that that the percentage of loans under the relief assistance has improved slightly from 15 per cent at the end of December 2020, mainly because some of the relief programmes in Indonesia and Thailand have ended.

In Malaysia, it said that the consumer loan portfolio under the relief assistance has been stable, but there has been an uptick in corporate loans under relief assistance.

"Management remains comfortable with its financial year 2021 (FY21) credit cost guidance of 80-90 basis points. Having put in RM1.5 billion provision overlays in FY20, there is some cushion," it said.

The research house highlighted that CIMB currently has RM7.7 billion and RM2.0 billion worth of goodwill and intangible assets on its books, respectively, and will be looking to write-off a portion of this in FY21/22.

"As we have not factored this in yet, reported earnings are likely to be lower than expected, but this is one-off and core earnings would not be impacted.

"This is no negative bearing on capital ratios, but this move should enhance return on equities (ROEs) over the longer term.

"Assuming management writes off RM2 billion or RM1 billion in FY21/22, we expected its FY21/22 ROEs to be enhanced to 6.7 and 8.8 per cent, respectively, from 6.6 and 8.4 per cent currently," it added.