KUALA LUMPUR, July 16 — AmInvestment Bank Bhd is maintaining a “buy” call on CIMB Group Holdings Bhd with an unchanged fair value of RM5.60 per share on expectation of decent second quarter (Q2) 2021 profit without lumpy provisions.

The financial services group is scheduled to announce its results for the quarter ended June 30, 2021, on Aug 27.

AmInvestment Bank said Q2 2021 was unlikely to see significant provisions for loans related to Covid-19 impacted sectors, with its management being comfortable with provisions buffers that the group had already built up thus far to weather the challenges from lockdowns implemented due to the pandemic.

In Q1 2021, the group had booked in about RM200 million provisions on a Malaysia leisure-related industry loan account.

“From last year until Q1 2021, based on our tracking, the group has built up provision buffers through adjustments in macro-economic factors and overlays cumulating to RM1.5 billion,” it said.

AmInvestment Bank said in Q4 2020, the group had set aside RM395 million provisions for debt securities.

“We understand that the group is comfortable with the provisions already raised for the bonds. It is unlikely to see further provisions ahead for its bond portfolio,” it said.

It noted that asset quality for the CIMB group overall in Q2 2021 had been stable.

It also said CIMB’s net interest income was likely to expand quarter-on-quarter (q-o-q) in Q2 2021 through loan expansion from large drawdowns while interest margins were looking better across the key markets of Malaysia, Indonesia and Singapore.

“For CIMB’s non-interest income, the strong fees and commission income for wealth management and unit trust seen in January and February 2021 have normalised in Q2 2021.

“We gather that trading income was slightly lower q-o-q in Q2 2021. Overall, total income in Q2 2021 is expected to be slightly lower versus Q1 2021,” it said.

AmInvestment Bank noted that as at end-March 2021, the group’s loans that were under moratorium and restructuring and rescheduling (R&R) were 13.0 per cent of its total financing.

By country, loans under moratorium and R&R for Malaysia, Indonesia, Thailand and Singapore accounted for 14.0 per cent, 13.0 per cent, 16.0 per cent and 5.0 per cent, respectively, of the countries’ total loans.

Meanwhile, Kenanga Research maintained its “market perform” rating for CIMB Group with a target price of RM4.40.

Although management stood firm with their earlier guidances during a pre-Q2 2021 results briefing, the research house remained cautious on the Malaysian front as prolonged movement controls could hamper economic recovery efforts.

It said the group’s R&R profile had seen encouraging improvement, with Malaysia’s 14 per cent declining towards six per cent.

However, this was blunted to high single-digit levels owing to the target moratorium introduced in June that was subsequently followed by the blanket moratorium, Kenanga Research said.

“At the moment, there is no indication of the take-up rate of the blanket moratorium, but management expects that it would not account for more than 20 per cent of the group’s outstanding loan base.

“This is due to the nature of it being opt-in as opposed to the previous opt-out approach which had a take-up rate of 60 per cent,” it said. — Bernama