Results

• CIMB Niaga reported FY15 net profit of Rp163bn (qoq: +82.8%; yoy: +250.5%), bringing FY15 reported net profit to Rp428bn (-81.7%). Excluding one-off expenses of Rp571bn, FY15 would have been higher at Rp856bn (-63.5%).

Deviation

• It has forewarned that provision will remain elevated in 2015, which will impact earnings. Moreover, soft economic growth also impacted earnings.

Highlights

• NIM declined by 15 bps qoq to 5.25% in 4Q15, bringing FY15 to 5.21 % (-15 bps), higher than management’s earlier guidance of 5%. Moving into 2016, management guided that NIM will compress further to 5% or below, mainly on the back of competitive environment.

• Loan grew marginally by 0.6% in FY15, on the back of weak economic sentiment and prudent asset quality management. Despite having anticipated a soft 1H16, management guided for a loan growth of 7-8% in FY16, underpinned by the rollout of economic initiatives and incentives.

• Gross NPL increased to 3.74% in 4Q15 from 3.17% in 3Q15 (resulting in absolute amount increasing by Rp1 trn qoq), due mainly to weak economic envi ronment (in particularly, the property and auto segments). On a more positive note, management highlighted that much of the additional restructured loan during the quarter was done on proactive basis, and it was still contained within the commodity-related sector. Credit cost increased by 50 bps qoq to 3.17% in 4Q15, and management believes credit cost will improve from FY15.

• Works are underway to revalue its land assets, to help its capital position, and more details will be shared in 1Q16.

Risks

• Unexpected jump in impaired loans, lower than expected loan growth and impact on non-interest income when there is a slowdown in capital markets.

Forecasts

• Unchanged, pendi ng CIMB Group’s 4QFY15 results scheduled on 25 Feb 2016.

Rating

• Trading Buy

Positives

• Proxy to economic growth and capital markets as well as growing regional universal bank platform, new core banking system (1Platform) and new T18 initiatives.

Negatives

• Impact on non-interest income when capital markets soften, impact of asset quality deterioration in Indonesia and legacy high cost structure.

Valuation

• Target price maintained at RM5.16 (based on Gordon Growth with ROE of 10.3% and WACC of 10.1%) for now, pending CIMB Group’s results scheduled on 25 Feb 2016.

Source: Hong Leong Investment Bank Research - 25 Feb 2016