CIMB Malaysia Indonesian outfit, CIMB Niaga released its first quarter results registering a Core NP of IDR1.68tr which grew by +6%yoy. Kenanga said this is their best ever result. Despite reporting weaker NII and NOII, Niaga was able to post
growth by demonstrating better cost control and lower provisions.
1QFY24’s Core NP grew by +7%qoq. Largely due to improvement in NIIs (there was a +15bps qoq increase in NIMs) and much stronger NOII (from a weaker result in 4QFY23) – despite facing sharp cost growth (low base effects) and higher provisions. Some uncertainty about NIMs. Management is still coming to terms with last week’s rate cut and refuses to give out numerical data on the potential impact to NIMs. They suggest that the impact will be stable to negative – depending on how their peers react. Regardless, management is still optimistic about hitting its FY24 target (recall that they factored in
1 rate hike into their forecast). Continued CASA momentum remains the core growth driver – the Group is focusing on non-sticky mass market CASA (especially in 2nd tier cities) and operational accounts.
Management observes that establishment and admin costs are already starting to be more efficient from cost-cutting measures. It believes it can further optimise its CIR, as asset growth continues to outstrip cost growth.
Loan growth contracted by -0.8%qoq. The weak result was due to seasonal effects (holiday season) coupled with
management taking a more cautious approach to applications – particularly in the non-retail segment. Observe a particularly
sharp contraction in the corporate segment.
Deposits, on the other hand, experienced huge rebound after 4QFY23’s sharp dip, jumping by +5.2%qoq. While time deposits saw decent growth, CASA saw an impressive +6.3%qoq rebound. NPL ratio climbs to 2.1% from 2.0% last quarter. However, this is less the case of further deterioration, and more so a contraction in gross loans (especially within the business banking portfolio). The Group still sees further room for NPL ratio improvement. However, it is less clear about provisioning outlook for FY24: while there was a lower NCC of 82bps (FY24 target 100-110bps), the Group continues to retain its NCC target, implying heavy provisions in coming quarters.
Forecasts unchanged.
Key downside risks. (1) Lacklustre NOII, (2) Higher-than-expected COF, (3) Weak loan growth. Upgrade to BUY call: Unchanged GGM-TP of RM 6.95 (from RM6.95). The TP is based on an unchanged FY25F P/BV
of 0.97x. The house upgraded its call as the share price has become more attractive recently.
