Bad bank earnings

CIMB and Affin reported earnings.  Both were horrible.  CIMB is suffering due to Indonesia's operations, but Affin took a bad impairment on loan charge in its commercial banking unit.

I wonder if Affin just took loans no one wanted.  It seemed one large impairment was enough to take down it's whole quarter's earnings.  Good earnings to bad.  It's amazing what one quarter will do.  I know Affin wanted to grow its commercial banking unit, but taking loans no one wanted is not the way to do it.  Does it have any more loans no one wanted?

I actually foresaw Affin doing decently for this quarter and the next due to big IPOs.  But the sentiment has become suddenly bullish on the selling of the Affin-Hwang investment bank stake.  Thus Affin will probably trade down.

I'm back to neutral on this bank.  This current quarter blew any trading opportunities with this stock.

From the Edge:

KUALA LUMPUR (May 20): Affin Holdings Bhd ( Financial Dashboard), the country's seventh-largest lender by assets, posted a 78.9% drop in first-quarter net profit as higher loan impairment and overhead expenses eroded earnings.

Net profit fell to RM30.09 million or 1.55 sen per share for the first quarter ended March 31, 2015 (1QFY15) from RM142.73 million or 9.55 sen per share a year ago, mainly dragged by the commercial banking segment, but its investment banking and insurance segments performed well.

Revenue for 1QFY15 rose 21% to RM448.93 million from RM317.1 million in 1QFY14.

From the Edge:

CIMB Group Holdings Bhd ( Financial Dashboard) is likely to have a weak start to the year, if the first quarter financial results of its Indonesian and Thai banking subsidiaries are any indication. 

Higher levels of provision for bad loans in PT Bank CIMB Niaga Tbk and CIMB Thai Bank PCL saw each of them turning in a worse-than-expected performance last week. 

This will continue to weigh on CIMB Group’s earnings, say analysts. The group had one of its worst quarterly performances in the fourth quarter of last year, mainly because of high provisions. 

CIMB Group (fundamental: 1.05; valuation: 1.65) is expected to announce its first quarter results next month. 

“Generally, we expected a weak quarter because of CIMB Niaga,” AllianceDBS says in a research note. “However, the Malaysian business should see a better quarter in the absence of goodwill impairment for the investment banking business and a one-off large provision related to a legacy corporate account that was booked in the fourth quarter of 2014 (4Q2014),” the research house adds.

The Malaysia operation still accounts for the biggest chunk of CIMB Group’s earnings. Indonesia made up 19% of the group’s full-year earnings in 2014, but in better years, it used to be about 30%.