Maybank downgrades CIMB profit, TP lower at RM8.10

by **Cals** Tue 27 Aug 2013, 12:14

Maybank downgrades CIMB profit, TP lower at RM8.10
Business & Markets 2013
Written by Jeffrey Tan of theedgemalaysia.com
Tuesday, 27 August 2013 11:27

KUALA LUMPUR (August 27): Maybank Investment Bank Bhd (Maybank IB) downgraded its 2013 (FY13) net profit forecast for rival CIMB Group Holdings Bhd by 3% and reduced its target price (TP) for the stock to RM8.10 from RM8.30.

In a note today, Maybank IB analyst Desmond Ch’ng said the firm has however maintained its "hold" call for CIMB.

Ch’ng said the net profit forecast for CIMB will be trimmed by a further 3% from an earlier 5% to factor in lower-than-expected non-interest income in 2QFY13 amid weak capital markets.

“In terms of loan growth, it picked up slight momentum, rising 3.7% quarter-on-quarter (q-o-q) in 2QFY13 from 3%,” said Ch’ng.

Ch’ng also mentioned that CIMB's management has maintained its credit-growth guidance at 15% this year in anticipation of corporate lending picking up regionally in the second half of this year.

“As for net interest margin (NIM), it was stable q-o-q at 2.89% but overall NIMs shed 21 basis points (bps) in 1H13 versus 1H12. We are looking at a contraction of 18 bps for the full year,” he said.

Meanwhile, Ch'ng said CIMB's liquidity remains more than ample with a group loan-to-deposit ratio (LDR) of 86% while US dollar-denominated LDR rose 60%.

On CIMB's TP, he said the fair value is cut by 2% to RM8.10 based on 1.8 times FY14 price-to-book ratio, and a return on equity of 14.7%.

Ch’ng's note was issued following the announcement of CIMB's latest financials yesterday.

He said CIMB’s 2QFY13 results came in below Maybank IB's expectations and consensus with 1HFY13 core net profit making up 47% of Maybank's full-year forecast and 45% of street estimates.