KUALA LUMPUR, June 1 — MIDF Research has maintained its “Buy” call on CIMB Group Holdings Bhd with a higher target price (TP) of RM4.60 from RM4.50 previously.

In a note today, the research house said the group had a tremendous start to the year, reporting above expectation with a net profit of RM2.46 billion in the first quarter of 2021 (Q1 FY2021), due to one-off deconsolidation gain of Touch ‘n Go Digital amounting to RM1.16 billion.

“However, discounting this, its core net profit was above MIDF and consensus’ expectations at 42.9 per cent and 34.1 per cent of respective full-year estimate. The variance was due to continued lower-than-expected provisions,” it said.

MIDF said CIMB’s core earnings for Q1 more than doubled, growing 156 per cent year-on — year (yoy) due to a combination of higher net income as well as lower provisions.

“Net income increased 5.9 per cent yoy on higher trading and foreign exchange income and wealth management fees.

“One of the factors for the lower provisions was the absence of lumpy provisions in Q1. Recall, that Q1 FY2020 saw the group having to take loan provisions from a single impairment in Singapore from the oil and gas sector amounting to around RM430 million,” it said.

On loan growth, the group saw a tepid gross loans growth for Q1, which grew marginally by 0.7 per cent yoy to RM366.6 billion due to the de-risking of its loans book while total customer deposits grew 3.3 per cent yoy to RM412.2 billion.

The growth in deposit was led by Current Account Saving Account (CASA) expanding 19.8 per cent yoy to RM174.5 billion while fixed deposits and other deposits declined by 6.2 per cent yoy to RM237.7 billion, said MIDF.

It said it is worth noting that CIMB Group still made Covid-19 related and management overlay provisions amounting to RM182 million and RM103 million respectively in Q1 FY2021.

“Moving forward, CIMB Group expects gross loans growth of 4-5 per cent for FY2021.

“All-in, we believe that FY2021 will see better performance from the group as the situation improves given the vaccine rollout and rebound in Gross Domestic Product.

“We view the reimposition of movement control order in Malaysia as a minor dent where the situation will stabilise with the acceleration of the national vaccination programme,” MIDF added. — Bernama