- At a recent company update, CIMB Group Holdings (CIMB) indicated that its Indonesian subsidiary CIMB Niaga remained focused on managing liquidity given the generally tighter liquidity requirements in Indonesia. Despite increased competition for deposit, CIMB Niaga had not participated in the recent price war.

- This is due to its still comfortable loan-to-deposit (LDR) ratio of about 92%. LDR for Rupiah is about 100% while LDR for its USD segment is less than 70%. USD loan size at CIMB Niaga is about USD2.5bil or an estimated 17% of CIMB Niaga’s loan size. CIMB Niaga is now targeting overall asset growth of 10%, given its key focus currently on LDR management.

- Rates for CIMB Niaga’s assets have now been re-priced upwards to reflect the increase in interest rates in Indonesia. Thus far, NIM is still stable at about 5.2% to 5.3%, which is a marginal decline compared to a few months ago and is still about 60-70bps drop YoY.

- There had also been no major upticks in non-performing loans for CIMB Niaga, although the company is watchful of several selected corporate accounts. The two key areas that CIMB Niaga is likely to avoid going forward are the two-wheeler segments and micro finance segments. Furthemore, CIMB Niaga’s exposure to coal-related corporates is less than 5% of its loan book compared to 10% last year, which is reassuring. Otherwise, CIMB Niaga’s credit costs are likely to be around 100bps for FY13F (1QFY13: 78bps, 2QFY13: 49bps).

- Elsewhere, we believe the mandates secured for its investment banking division have been excellent in September, after a quiet two months in July and August. The mandates secured are from both the debt and equity markets. The flows for its treasury and markets division had also picked up in September, primarily from the forex business, following a subdued July and August months. The company also indicated that it is unlikely to experience any major losses for its securities portfolio.

- The recent update is positive as it indicates:- (a) signs of stabilisation in Indonesia; (b) pick-up in investment banking division; (c) stronger flows for its treasury and markets divisions; and (d) stable asset quality so far. Maintain HOLD. 

Source: AmeSecurities