Analysts sanguine on prospect of CIMB Niaga in FY19
KUALA LUMPUR: Analysts are sanguine on the prospect of CIMB Niaga Tbk (CIMB Niaga), the 92.5 per cent subsidiary of CIMB Group Holdings Bhd (CIMB), for the financial year 2019 (FY19) while others note that earnings will likely be supported by fee-based income.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) in its CIMB Niaga first quarter of FY19 (1QFY19) result review, the main key area of focus for FY19 will be the consumer and small and medium enterprise (SME) segments where digital propositions to be main differentiator.
“Also, new corporate loan bookings are gaining traction with infrastructure-related drawdowns expected in coming quarters,” MIDF Research said.
“The management expects CIMB Niaga to be a key driver to CIMB’s Forward23 five-year growth strategy.
“While we expect that margin compression will remain prevalent, we do not expect a repeat of the policy rate hike cycle in FY19.”
As such, the research arm believed net interest income (NII) will continue to improve in FY19, as indicated by the result in 1QFY19.
Last week, CIMB Niaga reported an unaudited consolidated net profit of 944 billion Indonesian rupiah in 1Q19, representing a 7.6 per cent year on year (y-o-y) growth.
“Overall, we are sanguine on the prospect of CIMB Niaga in FY19. We opine that net interest margin (NIM) will continue to improve and this will result in better income growth.
“Moreover, the impact of currency will be less prevalent to the group’s earnings as we expect that the rupiah to remain stable this year.
“We opine that the continuing asset quality improvement will continue to boost income resulting in more sustainable earnings growth,” the research arm added.
MIDF Research also opined that the group’s performance in Malaysia will continue to be solid.
Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) highlighted previously that loans will still be in the midsingle digit space as CIMB Niaga won’t be participating in the infra loans space. CIMB Niaga will be focused on the consumer and SME space and less on commercial and corporate sectors so as to strengthen asset quality.
“1Q19 NIM expansion was a surprise (as we expected for flattish NIM) due to repricing of assets; but management guided for higher funding costs ahead which we believe due to higher deposits intake,” Kenanga Research said, noting that loan-to-deposit ratio (LDR) was at over 100 per cent versus 94 per cent a year ago.
“On a positive note, improved fee-based income indicate an improved capital market activities ahead and likely picking up with conclusion of the recent Indonesian Presidential elections.”