CIMB Niaga FY22 results beat expectations, and supported by non-interest income (NOII), against growing market concerns, the group expects its solid fundamentals to potentially allow it to gain market share from other market leaders. Kenanga research maintains its forecasts, TP of RM6.40 and OUTPERFORM call for CIMB. The stock among the top picks for 1QCY23
Its 91.5%-owned CIMB Niaga reported FY22 earnings of IDR5.04t which exceeded consensus estimate by 9%. The positive deviation could be due to sustained strength in NOII streams, albeit with some diminishing marketable securities gains. Typically, Niaga makes up 15-20% of CIMB Group’s PBT. YoY, FY22 net interest income gained 3% mainly thanks to the 8%
expansion in its loans base which offset a 4 bps erosion in interest margins (to 4.71%), amid a competitive rate environment in Indonesia.
Meanwhile, NOII growth of 27% was chiefly driven by better forex and derivatives performance as well as wider loan recovery. Cost income was flattish at 47.5% as further personnel and technology investments moved in tandem with the higher top line. Credit cost also improved to 189 bps (-43 bps) easing concerns about asset quality. All in, Niaga’s FY22 core net profit came in at IDR5.04t (+20%). The group credited its solid delivery in FY22 to its frontline strategies in addition to digital enhancement.
Going forward, the group anticipates that its investments will continue to contribute, but possibly at a slower pace, due to tightening macro conditions as well as increasing competitive stress. Broadly, the group believes further traction could still be gained from its wider customisable services offered by digitalisation, to supplement its broadening CASA base. The group is also cognizant of inflationary pressures possibly undermining operating efficiencies but expects its built-in cost control measures to at least keep levels sustainable.
Amongst its guidances, the group opines to deliver: (i) loan growth of 6-8% (from FY22: 8%), (ii) interest margin of 4.6%-4.8% (from 4.7%), and credit cost of 1.6%-1.8% (from 1.9%). Forecasts. Post Niaga’s results, Kenanga leaves its earnings forecasts for CIMB unchanged for now, pending group-level earnings results to be released end-February 2023.
