- At our recent company visit, CIMB Group Holdings (CIMB) alluded that it is more positive on CIMB Niaga compared to a year ago. This is due to measures by regulators to cut fuel subsidies and interest rate movements in Indonesia. However, CIMB Niaga may not necessarily be more focused on growth this year, compared to last year.

- Asset quality in CIMB Niaga has also been relatively stable, with some upticks seen in the commercial segment. However, the corporate segment remained stable, along with the retail non-performing loans segment. CIMB believes that this may be due to sufficient reserve built up over the recent past.

- For CIMB Niaga’s retail-based NPLs, the company hinted the full impact may not be seen yet as retail lending rates will only be re-priced over the next six months. The other commercial and corporate segments were already re-priced.

- CIMB expects Singapore to do relatively well, while there may be some hiccups in Thailand. Overall growth in Malaysia is also expected to slow down. The corporate loans segment is expected to register some growth, although there are indications of possible delays in ETP-related loans. Non-interest income is expected to be strong in recent quarters, due mainly to good debt capital market (DCM) deals. The outlook for DCM is also strong in the near term.

- The recent capital raising exercise by the group, via the issuance of new shares, is partly intended to address part of the unrealised foreign exchange loss arising from Rupiah depreciation. This is related to revaluation of foreign currency assets and liabilities. The latest foreign fluctuation reserve was -RM1,569mil as at end-September 2013, which is a significant increase from -RM562mil as at end-June 2013. We estimate that most of the losses are attributed to unrealised foreign exchange translation from the depreciating Rupiah. Otherwise, we gather there are no particular imminent M&A plans for domestic or overseas operations.

- The company also hinted that it is relooking at possible provisioning for a legacy loan related to the oil and gas sector in Johor. The press had earlier reported that the loan exposure was RM840mil in 2012. We estimate that the group had already provided about 70% of the loan net of collateral values. Maintain HOLD. 

Source: AmeSecurities