- CIMB Group Holdings Bhd’s (CIMB) 97.9%-owned Indonesian subsidiary, PT Bank CIMB Niaga Tbk (CIMB Niaga) recorded the fourth consecutive quarter of flat net earnings in 4QFY13, taking net earnings growth to 1.2% YoY for FY13. Net earnings came in at 11% below our forecasts for CIMB Niaga. We estimate net earnings contribution at 34% for 4QFY13 (3QFY13: 34.0%) and 27.0% for FY13 (F12: 30%) based on our existing forecasts for CIMB.

- Loans growth fell substantially in 4QFY13 to 0.9% QoQ (3QFY13: +3% QoQ) and 8.0% YoY in FY13, but this is in line with the company’s earlier articulated stance to deliberately slow down growth, as it imposes more stringent underwriting standards across the board. The largest slowdown was seen for the corporate segment, as the company remained cautious. Looking ahead, the company alluded that it is likely to grow its loans below industry growth, which is estimated to be circa 15% for FY14F.

- Deposit growth was also relatively flat at 0.4% QoQ (3QFY13: 9% QoQ), which bumped up LDR marginally to 94.5% from 93.9%. NIM was steady at 5.34% in 4QFY13 vs. 5.31% in 3QFY13, while total NIM fell by 53bps YoY to 5.34% in FY13 from 5.87% in FY12. The company alluded that while cost of funds has moved up by 80bps-90bps on average, this was not immediately translated into re-pricing of loans, leading to average loan being repriced upwards by only 40bps. Looking ahead, the company believes that interest rate hike has peaked but visibility on NIM direction remains unclear due to the uncertain market conditions.

- Non-interest income did well, largely due to the forex segment which enjoyed good spreads on forex transactions executed on behalf of third-party customers. Gross impaired loans eased somewhat in 4Q by -3.4% QoQ, after recording a large spike of 13.6% QoQ in 3Q. The previous 3Q’s rise was attributed to the company’s widening of its impairment criteria, as well as a generally slower repayment profile across the board. The company indicated that repayment remains slow, with some borrowers being a couple of months late in repayment, but these have not fallen into impaired loan status. Credit costs was 92bps in 4Q (3Q: 98bps) and 80bps in FY13 (FY12: 85bps).

- The company hinted that credit costs may be at ~80bps FY14, depending on economic conditions. We believe the company is still highly cautious, and expects impaired loans to need at least two more quarters to stabilise. Maintain HOLD on CIMB.

Source: AmeSecurities