CIMB Niaga rounded off 2012 on a stronger note, registering a healthy YoY net profit growth of +33% and accounting for about 1/3 of total net profits, underscoring its importance to the CIMB Group. Niaga continued to tick all the right boxes in terms of operational improvements, with steady net interest margins, capital adequacy ratios and reducing non-performing loans ratios amongst key highlights. The CIMB Group is one we continue to like for its regional diversity. The recent weakness in its share price, on unfounded worries in our opinion, reinforces our conviction in the prospects of the stock and reaffirms our Outperform call with an unchanged target price of RM8.50, yielding a potential upside of 18.7% from current levels.

Loans book increases 16.0% YoY, deposit base at a lesser 15.0% YoY. Some notable growth numbers were seen in certain loan segments, most pronounced of which were in personal loans (+135% YoY to Rp943bn), syariah financing (+133% YoY to Rp7.68trn) and mikro laju loans (+73% YoY) to Rp2.15trn. The commercial segment continues to drive Group loans growth with a 22% YoY and 6% QoQ growth, as its gradual move into the mortgage segment as a growth driver going forward continues to gather pace. (+12% YoY, +3% QoQ). Total deposits grew at a lesser 15.0% however, with the lower-cost CASA deposits increasing by 16% to Rp65.65tn.

Net interest margin (NIM) strengthens on an annual basis, but continues to weaken sequentially as a result of increased pressures on both funding costs and asset yields. An acceleration of growth in highmargin business segments like micro-finance, credit card, auto-financing and personal loans should mitigate any significant margin erosions from its gradual push into the mortgage segment however. 4Q2012 NIM is currently at 5.87% vs. 5.63% a year ago, and 5.90% three months ago.

Asset quality strengthens. Further improvements were seen in its asset quality, with a 0.35% YoY decline in gross non-performing loans ratio to 2.29% while its gross impairment ratio improved 0.93% YoY to 2.68%. Cost-income ratio also registered a 3.48% YoY improve to 46.17%. Critically, its capital adequacy ratio increased 1.99% YoY to 15.16% from 13.17%, with healthy core capital ratios standing it in good stead for Basel III requirements.

Source: PublicInvest Research - 15 Feb 2013