CIMB Niaga (Niaga)’s 1H23 results were within expectations and management is more upbeat about 2H23, on expectations of improving Net Interest Margin (NIM) and lower credit cost.
As such, the bank has since raised its FY23 Return On Equity (ROE) target to 14-16% from 12-14% previously.
“We maintain our forecasts for Niaga as well as CIMB Group. We maintain a BUY on CIMB Group with an unchanged Target Price of RM6.15,” said Maybank Investment Bank (Maybank IB) in a recent report.
Niaga’s 2Q23 net profit of IDR1.65tr took 1H23 core net profit to IDR3.23tr. The 1H23 results were within expectations at 50% of Maybank IB’s full-year forecast.
Positively, loan growth was still a decent 8.6% YoY, Non-interest Income (NOII) improved and the bank saw negative JAWS in 1H23. Credit cost was also lower YoY. On the flip side, NIM compressed QoQ but was nevertheless higher YoY in 1H23.
Most of the bank’s FY23 targets are maintained – loan growth of 6-8%, NIM of 4.6-4.8% and cost/income ratio less than 45%.
“However, management is more upbeat about credit cost in 2H23 and has revised its credit cost guidance to 1.5-1.7% from 1.6-1.8% previously. Correspondingly, management has raised its ROE guidance to 14-16% from 12-14% previously,” said Maybank IB.
1H23 NIM of 4.61% is within management’s guidance of 4.6-4.8% for the year. Nevertheless, management is hopeful of an improving trend in 2H23, primarily on the back of lower funding cost, as the bank looks to improve its overall Current Account Savings Account mix.
