KUALA LUMPUR: Maybank Investment Bank Research has downgraded its recommendation on CIMB Group Holdings Bhd to “hold” following its recent share price rally but maintained its earnings projections for the remainder of the year.
Ahead of Bank Negara’s monetary policy decision this week, the research house said it expects the overnight policy rate to remain unchanged for the rest of the year.
However, a 25bps reduction in the OPR would impact CIMB’s net interest margin by 3-4bps and trim FY21 earnigs by 2%, it said.
“As it stands, we have assumed a NIM expansion of just 10bps for FY21 which is at the lower end of management’s guidance, thus providing some buffer to our forecasts,” said Maybank IB.
The research house said it cannot predict the size of the modification loss from the second loan moratorium at this stage.
“Assuming a similar one-off net modification loss to that in FY20 of MYR214m, the impact to FY21 group earnings (assuming lower NIM from a 25bp rate cut as well) would be -6%,” it said.
FY21 ROE would also fall to 6.6% as compaed to the research house’s present forecast of 7%.
It added that management’s credit cost guidance of 80-90bps seems adequate for now, having put through substantial provisions.
Maybank IB maintained its target price of RM4.90 on the counter, which reflects a FY22 price-book value of 0.85x and an ROE of 8.8%.
Source: The Star
