PETALING JAYA: CIMB Group Holdings Bhd ’s long-term prospects are intact for now but the bank will face several headwinds over the short term.

       In a report following the release of its results, MIDF Research said: “CIMB has a number of headwinds in the short term, most notably that of its asset quality, heavy provisions and average loan growth.”

       Notably, shares of the lender yesterday were hammered, falling over 7% to multi-year lows after the bank said on Monday that it made provisions totalling around RM280mil for a processing error that resulted in excess funds being deposited into some of its customers’ accounts.

       “While we remain positive on the group’s long-term prospects, most notably for its kitchen-sinking exercise and portfolio restructurings abroad, we remain less certain on its short-term prospects,” MIDF said.

       It noted that CIMB’s core net profit of RM4.65bil for financial year 2021 (FY21) made up 103% and 97% of its and consensus expectations, respectively.

       “CIMB’s fourth quarter FY21 core net profit of RM811mil fell by 33.6% quarter-on-quarter, due to higher operating expenditure and net impairments.”

       RHB Research noted that CIMB made good progress in 2021 in its efforts to reshape its loans portfolio and drive cost efficiency.

       “The bank is now ready for stronger loan growth in FY22 while structured cost take-outs have also led to a sustainable cost-income ratio reduction.

       “Management remains vigilant on asset quality despite a loan book clean-up,” it said.

       Citing information from a briefing with CIMB management, RHB Research said CIMB expects gradual recovery in key operating markets to underpin improved financial performances in 2022.

       That said, return on equity is projected at 7.5%-8%, impacted by Cukai Makmur.

       “Management is targeting loan growth of 5% to 6% with net interest margin expected to be stable and margin pressures coming mainly from Indonesia and Singapore.”

       It said while fee income growth was expected to be good, income from trading and investments would be impacted by market volatility and tough trading conditions.

       It also noted credit cost was expected to stay elevated at 60 to 70 basis points, driven by non-retail exposure across markets. “Management flagged the possibility of further provisions for the double-crediting of accounts in the first quarter of 2022.”

       Keeping its “buy” call on CIMB, RHB Research also said it was revising upwards its target for CIMB’s FY22-FY23 earnings, following fresh assumptions for the lender’s key earnings drivers, post-FY21 results.

       Yesterday’s heavy selling of the CIMB stock saw it close at RM5.29, valuing the entire banking group at RM54.07bil.