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LENDING & CREDIT | Cesar Tordesillas, Malaysia

CIMB get positive outlook despite lower provisions

CIMB Bank 's first quarter revenues were driven higher from non-interest income from debt capital markets.

Nonetheless, it had lower provisions as expenses inched up led by personnel and establishment costs.

Based on research reports by HDBS Vickers, and Kenanga Research, net interest margins fell marginally, but loan growth was flat quarter on quarter against moderate growth expectations.

HDBS Vickers understood there would have been a slight uptick in loan growth if not for accelerated write-offs, repayments of largely business loans, and conversion of some corporate loans to bonds.

While Kenanga Research noted that robust contribution from wholesale banking’s profit before tax of RM641 million was up from 4Q11 RM599 million.

Together with Investment’s PBT of RM170 million, total PBT contributed by these two segments was higher by 25 per cent q-o-q. CIMB Niaga meanwhile contributed RM315 million to the group PBT, making up a 32 per cent share.

Although capital ratios fell due to Bank Negara Malaysia’s ruling requiring higher risk weights for loans committed but not drawn, HDBS Vickers remained positive as CIMB maintained it was prepared to adopt Basel III when due.

In the extreme case, CIMB could sell certain non-core assets to raise capital rather than issue equity.

The research house opined that though bond market deals boosted fee income in the 1Q12, in the next few quarters, fee income would be dominated by equities, premised on several major IPOs in the pipeline.

Forex income should remain strong on sustainable customer flow.

Kenanga Research were positive on the group’s recent acquisition strategies and believe that CIMB was poised for a rerating as the group was now of the biggest proxies to ride the Asean region resurgence if economic growth in the region remains resilient over the next two to three years.

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