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Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Lower Tax Rate Offset By Massive Provisions: CIMB Group (CIMB.MK) [CIMB] reported 4Q20 results of MYR 195.8 mn, increasing MYR 16.7 mn (9.3%) linked quarter. During the period, we noted a  massive reduction in its tax rate from 60.6% in 3Q20 to 18.0% which was additive to bottom-line performance by MYR 70.8 mn. However, this was offset by an enormous increase in loss provisions reflecting a breakdown in credit quality; and   *Credit Risk Now Accelerating: With NCOs of MYR 1.9 bn (accelerating from the MYR 1.2 bn posted in 3Q20), we find that net new NPLs increased MYR 2.6 bn or a whopping 83.5% on an annualized basis. We continue to believe that reserve cover is too light by MYR 12.0 bn (versus MYR 1.5 bn in 3Q20) – which nearly six years of profit before tax or 21.1% of 4Q20 capital.

*Lower Tax Rate Offset By Massive Provisions: CIMB Group (CIMB.MK) [CIMB] reported 4Q20 results of MYR 195.8 mn, increasing MYR 16.7 mn (9.3%) linked quarter. During the period, we noted a  massive reduction in its tax rate from 60.6% in 3Q20 to 18.0% which was additive to bottom-line performance by MYR 70.8 mn. However, this was offset by an enormous increase in loss provisions reflecting a breakdown in credit quality; and   *Credit Risk Now Accelerating: With NCOs of MYR 1.9 bn (accelerating from the MYR 1.2 bn posted in 3Q20), we find that net new NPLs increased MYR 2.6 bn or a whopping 83.5% on an annualized basis. We continue to believe that reserve cover is too light by MYR 12.0 bn (versus MYR 1.5 bn in 3Q20) – which nearly six years of profit before tax or 21.1% of 4Q20 capital. 

CIMB Group – Heading Deeper Into the Woods