Moderate loan growth for CIMB Thai

PETALING JAYA: CIMB Thai, which posted an annualised net loan growth of 5%, is expected to see its loan growth continue to moderate in line with the slower economic growth in Thailand, said MIDF Research.
"Modified loan-to-deposit ratio for CIMB Thai was 90.5% as at end 2QFY15. We continue to expect slower pace in CIMB Thai's loan growth. This is in view of the slower gross domestic product (GDP) growth in Thailand as government spending has failed to arrest the decline in exports and domestic demand," it said in its research note yesterday.
The research house maintained its earnings forecast for CIMB Group Holdings Bhd, pending the group's 2QFY15 results, which will be released on Aug 28.
"Similar to the high provisions for CIMB Thai, provisions are also expected to remain high for Niaga in its upcoming 2QFY15 results, which are expected to be released on July 31. CIMB Group is expected to remain focused on managing costs (operating expenditure) to improve the group's earnings in the near term before moving on to achieve higher revenue," it said.
It said that stronger momentum in the group's operating income is yet to be seen and with the challenging operating environment for banks, it continues to expect slower momentum for corporate loans while capital market activities are expected to remain soft in the near term.
It maintained its "neutral" call on CIMB Group with an unchanged target price of RM6.10 on the back of unexciting top line growth expected for FY15.
Affin Hwang Capital upgraded CIMB to "hold" from "sell" as the stock is currently trading close to its price target of RM5.50.
Kenanga Research, which maintained its "market perform" rating and RM6.31 target price on the stock, said net interest margin (NIM) compression is likely to stay.
"Weak exports and slow domestic consumption continue to drag the Thai economy. In response, Bank of Thailand had again lowered the key interest rate to 1.5% from 1.75% back in April; this marks the fourth rate cut since November 2014.
"Furthermore, the high industry's loan-to-deposit ratio of over 100% will spur competition in the market, especially within the deposit taking space," it said.
It maintained its forecasts for CIMB Group, adding that CIMB Thai contributes only about 5% to the group's pre-tax profit.
Meanwhile, PublicInvest Research said CIMB Thai's core banking operations are still weak, with higher operating numbers coming in as a result of lower expenses and higher non-interest income.
"With the group still embarking on recalibrating itself for greater growth from 2018 onwards and hence giving rise to potential near term earnings volatilities, our neutral call and target price (RM5.70) remain unchanged," it said.