Highlights

CIMB Group Holdings Bhd - Fruits From Improving Asset Quality

Date: 21/02/2019

Source  :  MIDF
Stock  :  CIMB       Price Target  :  7.70      |      Price Call  :  BUY
        Last Price  :  3.47      |      Upside/Downside  :  +4.23 (121.90%)
 


INVESTMENT HIGHLIGHTS

  • Lower provisions and strong NOII growth drove double digit earnings growth
  • Bearing fruit from focusing on improving asset quality
  • Resulting in sacrificing NIM slightly
  • Good growth in loans to consumer and SME segments
  • No change to our forecast
  • Maintain BUY with unchanged TP of RM7.70 pegging the stock to 1.3x FY19 Price-to-Book multiple

Strong earnings growth from lower provisions. CIMB Niaga FY18 net profit grew +16.9%yoy driven by lower provisions. Provisions fell -25.7%yoy as it reaps the efforts from improving its asset quality. Gross NPL fell -64bps yoy as at 4QFY18 to 3.11%.

Broad base asset quality improvement... We noted that while consumer gross NPL was flat at 2.5% as at 4QFY18, the corporate and SME segment gross NPL improved -120bps yoy and -50bps yoy to 1.3% and 3.0% respectively. More notable was the improvement in gross NPL of the commercial segment as it reached an inflection point and expected to trend further downwards. It came at 7.9% as at 4QFY18 from 9.3% as at 2QFY18 and 8.2% as at 4QFY17.

... but sacrificed NIM and asset growth to achieve this. NIM compressed by -6bps qoq and -9bps yoy in 4QFY18. As for FY18, NIM fell -48bps yoy. We understand the NIM compression was a combination of the aggressive policy rate hikes by Bank Indonesia and as a result of the management's focus on improving asset quality. This in particular led CIMB Niaga to opt for better quality assets which in general have lower yields. Another consequence was that gross loans grew at +1.8%yoy to IDR188.47t. Nevertheless, mortgages (+11.2%yoy to IDR30.0t), credit cards (+5.5%yoy to IDR8.6t) and SME loans (+8.5%yoy to IDR29.6t) grew robustly.

NOII helped to moderate NII weakness. NII fell -3.2%yoy from the NIM compression and sluggish loans growth but this was moderated by NOII expansion of +13.8%yoy. This was mainly due to higher recoveries (+55.5%yoy to IDR619b) and forex & fixed income derivatives (+30.0%yoy to IDR940b).

Source: MIDF Research - 21 Feb 2019

Share this
Labels: CIMB

Related Stocks

Chart Stock Name Last Change Volume 
CIMB 3.47 -0.09 (2.53%) 17,139,100 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program
 
 

308  664  417  518 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 DSONIC-WA 0.585+0.09 
 VELESTO 0.16-0.005 
 KNM 0.205-0.015 
 ARMADA 0.215-0.015 
 GDEX 0.37+0.05 
 DSONIC 1.55+0.21 
 GPACKET-WB 0.35+0.04 
 AGES-PA 0.03+0.005 
 MEDIA 0.16+0.005 
 MSM 0.665+0.015 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
2. MQ Affiliate – A smarter way to earn more rewards MQ Trader Affiliate Program
3. MQ Affiliate – How to become an effective affiliate MQ Trader Affiliate Program
4. MQ Affiliate – Upgrading to Affiliate Partner MQ Trader Affiliate Program
Partners & Brokers