KUALA LUMPUR – CGS-CIMB Securities Sdn Bhd is still projecting a core net profit (NP) growth of 2.4% for banks in 2022, even after it has adjusted its earnings projection to factor in Cukai Makmur (prosperity tax) and a 25-basis point hike in the overnight policy rate (OPR) in mid-2022.
“We cut our projected core NP growth from 10.5% to 9% for 2021 and from 8.1% to 2.4% for 2022.
“We are encouraged that our expected earnings recovery in 2021-22 forecast (F) remains intact after factoring in Cukai Makmur, despite projecting core NP to expand at slower rates,” said the brokerage firm in a research note.
It has also raised its projected growth in core NP for banks from 7.6% to 17.7% for 2023, due to a lower base for 2022F core NP, which is expected to be affected by Cukai Makmur and the positive impact of the OPR hike on 2023 earnings.
The firm reiterated its “overweight” rating on Malaysian banks, given the potential re-rating catalyst from the continuation in earnings recovery in 2022.
The projected 7% increase in net interest income and 4.8% drop in loan loss provisioning are expected to be the earnings catalyst for 2022.
“Following the earnings adjustments, we kept our recommendations for all Malaysian banks under our coverage, including ‘add’ ratings for Public Bank, Hong Leong Bank, Maybank, RHB Bank and AMMB, as well as ‘reduce’ calls for Affin Bank and Alliance Bank.
Meanwhile, Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus said, the impact of the proposed prosperity tax is expected to be manageable for the banks, given that it is a one-off tax.
“Although Cukai Makmur will lower the banks’ retained earnings for next year, their overall profitability is expected to remain supported by improvements in loan growth as the country recovers from the prolonged effects of the pandemic.
“(It will also be supported by) the potentially lower levels of provisioning next year amid some improvements in the credit risk outlook,” she said in a joint press conference by BNM and the Statistics Department on Malaysia’s third-quarter 2021 gross domestic product performance here today.
She was responding to a question on whether the proposed tax would lower the banks’ total net profit for the financial year 2022 and how would they prepare for this new tax.
When tabling Budget 2022, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz announced that companies with earnings above the RM100 million mark would be taxed at a rate of 33%, instead of the blanket 24% rate previously.
The one-off tax was for the assessment year 2022, and is expected to have an impact on not more than 250 companies. – Bernama, November 12, 2021
