Kenanga Research said CIMB Niaga’s first-half net profit was stronger than expected as it continued to sustain growth in both fund and fee-based income streams.
PETALING JAYA: The outlook for CIMB Group
Holdings Bhd’s 92.5%-owned Indonesian arm PT Bank CIMB Niaga Tbk is expected to remain bright, following the strong first-half 2023 showing.
Kenanga Research said CIMB Niaga’s first-half net profit was stronger than expected as it continued to sustain growth in both fund and fee-based income streams.
The encouraging performance led the group to improve its targets, confident that it is fundamentally well equipped to hold its market position and outshine its peers, it said.
The research house said with this strong showing, the group is confident of upgrading its full-year targets, namely a higher return on equity of 14% to 16%, from 12% to 14%, and lower credit cost of 150 to 170 basis points (bps), from 160 to 180 bps.
Meanwhile, the research house said its loan growth target of 6% to 8% and net interest margin (NIM) target of 4.6% to 4.8% are unchanged.
“While this may indicate that bottom line performance will be carried by better provisioning needs, the group is confident that its top line will remain fundamentally steady as it continues to win market share over smaller-scale competitors.
“The normalisation of funding costs on a declining termed deposit mix would keep interest margins manageable.
“Meanwhile, Bank Indonesia is considering implementing the spin-off for Islamic banking units that may cause some division between institutions.
“However, the group indicated that it is still assessing the situation,” Kenanga Research added.
CIMB Niaga’s net profit rose by 11.2% in the first half ended June 30, 2021 to 2.1 trillion rupiah (RM614mil) due to higher operating income while operating expenses were generally flat.
Commenting on CIMB Niaga’s prospects, Hong Leong Investment Bank Research said: “We see quarterly NIM recovering in the second half on the back of loan-to-deposit ratio optimisation, scope for loan repricing and push for further current account, savings account growth by leveraging on its strong digital offerings.
“Besides, CIMB Niaga deliberately shied away from areas that face irrational price competition in order to protect NIM. That said, credit growth is seen to moderate due to a softer local macro environment.
“We are not overly worried on asset quality, seeing that CIMB Niaga has already made heavy preemptive provisions to cushion any jump in gross non-performing loan ratio.”
