CIMB's net profit up 45% to US$275m in Q1

Find out what the positives were for the quarter.

According to RHB, 1Q17 was a decent operating quarter for CIMB Group. ROEs are expected to expand further in FY18 and as it stands, our FY18E ROE of 10.2% trails management’s target of 10.5-11%.

Here's more from RHB:

Amid better prospects ahead, we maintain our BUY call with a higher TPof MYR7.00 (+70sen), pegging on a higher PBV of 1.2x (1.1x previously) to reflect the overall improvement in the operating environment and the potential for upside surprises to earnings if credit costs come in lower than expected.

CIMB’s 1Q17 reported net profit of MYR1.18b (US$275m) (+45% YoY, +38% QoQ) included a provision write-back of MYR120m. Excluding this, recurring net profit of MYR1.06b (+30% YoY, +24% QoQ) was within expectations at 24% of our full-year forecast and consensus. Positives for the quarter include (i) robust domestic loan growth, (ii) strong CASA accumulation,(iii) positive JAWS and (iv) lower credit costs.

Absolute group gross impaired loans (GIL) declined 3% YoY and its GIL ratio dipped to 3.2% end-Mar 2017 from 3.3% end-Dec 2016 while loan loss coverage was stable at 79.6% (93.2% including regulatory reserves). The group’s credit cost would have been 67bps excluding the MYR120m provision write-back, and this compares against 93bps in 4Q16 and management’s guidance of 60-65bps for FY17.

The expected sale of a stake in its regional investment banking platform to China Galaxy is expected to be signed in 2Q17, with completion targeted for 4Q17 and the cost benefits to flow through in FY18. The sale of its 20% stake in Bank of Yingkou is expected to be completed in 3Q17. The group’s CET1 ratio of 11.5% is presently comfortable.