PETALING JAYA: The one-off special tax under the Budget 2022 (Cukai Makmur or prosperity tax) will affect bank’s earnings next year but profits will improve in 2023.
Banking analysts said the tax, which is set to be imposed on companies which make more than RM100mil in pre-tax profit for financial year 2022 (FY22) will slash profits for banks that year, but possible hikes in the overnight policy rate (OPR) will lift earnings the following year.
CGS-CIMB Research said in a report to clients that it was making revisions in its earnings per share (EPS) forecasts for banks to factor in these assumptions.
“We make three changes to our EPS forecasts, factoring in Cukai Makmur, an OPR hike of 25 basis points in mid-2022, and the lifting of the assumed share base from 11.69 billion shares to 11.87 billion shares to include the 179.8 million new shares issued under the dividend reinvestment plan,” it said of Malayan Banking Bhd (Maybank).
“Consequently, our EPS forecasts are reduced by 0.8% for FY21 due to its higher share base, cut by 7.5% for FY22 as the impact of Cukai Makmur more than offsets the impact of the OPR hike, and raised by 0.5% for FY23 given the OPR hike.
“Our FY22 dividend per share is also cut by the same magnitude of 7.5%,” it added on Maybank.
That said, the research house was keeping its “add” call on Maybank as the lender should benefit from a stronger loan growth of 5%-6% in Singapore and low-teens in Indonesia for 2022.
“This will help Maybank to register a rebound in its overall loan growth in FY22, which is a re-rating catalyst for the stock,” the research house added.
On AMMB Holdings Bhd, CGS-CIMB said it was also cutting its projected FY22 net profit for it by 11.1% (due to Cukai Makmur) but raising its FY23-24 net profit forecasts by up to 4% on OPR hike assumptions.
“Following our earnings adjustments, we are projecting higher net profit growth of 19.5% in FY23 and 4.7% in FY24 for AMMB versus 3%-4% previously,” the research house added.
It is also retaining its “add” call on AMMB given the bank’s attractive valuations and because its 2022 price to earnings ratio of 6.8 times is the lowest in the sector.
“The potential re-rating catalyst for the stock is continuous earnings recovery,” it added.
On Alliance Bank Malaysia Bhd, CGS-CIMB said it was cutting its projected FY22 net profit by 9.9% as it factored in Cukai Makmur.
Similarly, it is raising its net profit forecasts for FY23 and FY24 by 5% and 6.4%, respectively, as it factored in an OPR hike of 25 basis points in mid-2022.
Nevertheless, the research house is retaining its “reduce” call on Alliance Bank as it thinks that the bank faces higher credit risks from the Covid-19 pandemic compared to its peers, reflected in its guidance of a credit charge-off rate of 90 basis points in FY22.
“Potential de-rating catalysts include higher credit costs and a wider-than-expected increase in its gross impaired loan ratio, which we believe will take place when the industry’s GIL ratio peaks in 2022 following the withdrawal of repayment assistance by banks, “ it said.
The research house said it preferred Public Bank Bhd for exposure to the banking sector.