KUALA LUMPUR: CIMB Group Holdings Bhd has said that its buffers remain comfortable despite some need for top-ups as more borrowers apply for repayment relief given the latest moratorium.
“The banking group is maintaining its 80-90bps credit cost guidance for now, but acknowledges the heightened uncertainties, especially in Malaysia.
“There could be some further top-up provisions (hinges on the lockdown period) but management reiterated that the existing pre-emptive buffers are still sufficient,” said RHB Research in a note following a briefing.
The portion of Malaysian consumer loans on relief programmes fell to as low as 6% in end-May versus 14% in end-Dec 2020 but has since climbed higher, given the latest iteration of the moratorium.
In terms of applicant mix, management is seeing more new applicants versus repeat applicants).
CIMB expects the overall portion to peak under 20%, given the nuances in the latest moratorium.
The opt-in nature and interest accrual would deter opportunists from applying for this relief while modification losses should be lower as well.
RHB Research, which has a “buy” call on the stock with a target price of RM5.20, said CIMB’s overall operations and asset quality are still stable.
“We take comfort that the decline in the number of borrowers on relief programmes up to end-May has freed up provision buffers to absorb the latest round of lockdowns.
“This also decreases the immediate need to make significantly higher provisions, and buys management time to observe the trends first,” it said.
It added however that the situation remains uncertain and there could be a need for some top-ups.
Commenting on CIMB’s 2Q results, RHB said CIMB’s topline trend was decent with net interest income supported by favourable net interest margin movement while non-interest income declined quarter-on-uyqarter on lower unit-trust/wealth management income.
Opex grew year-on-year from a low base but 1H21 trajectory was within guidance, due to tight control on personnel and marketing expenses.
The deconsolidation of TnG Digital has also resulted in savings totalling MYR200mil from further losses