CIMB Group; Hold; RM7.10
Price target: RM7.90; CIMB MK

4Q13/FY13 net profit came in at Rp1,071bn / Rp4,282bn, in line with our expectation. 4Q13 numbers were largely unexciting; loans grew just 1% q-o-q, taking YTD loan growth to 8% which was below industry’s 19%. CIMB Niaga’s weak loan growth was deliberate, driven by stringent underwriting standards. Slowdown was noted in mortgages (-1% q-o-q; +8% y-o-y) and auto loans (-2% q-o-q; +5% y-o-y) while overall corporate banking hardly grew (+1% y-o-y). Deposit growth was flattish q-o-q; grew 8% y-o-y. Loan-to-deposit ratio (group level) stood at 94.5% against 95.0% a year ago and 94% a quarter ago.

NIM inched up 3bps q-o-q due to the effects of loans re-pricing in 4Q but fell 53 bps for the year. Asset quality showed some weakness for the second consecutive quarter, with impairment ratio rising to 3.2% in 4Q (from 2.8% in 3Q and 2.54% in 2Q). Nevertheless, we believe the coverage is sufficient with loan loss coverage ratio at 116%. CAR ratio stood at 15.36%. CIMB Niaga has issued bonds amounting to Rp1.45trn in Nov 2013; coupon rate was between 8.75%- 9.75%.

2014 outlook: Although interest rates should be less volatile in 2014, liquidity remains tight. CIMB Niaga’s loan growth should improve from 2013 levels but it will remain below industry average. Expect demand for loan to come from corporate side (eg palm oil sector). The Indonesian Stock Exchange (IDX) has imposed a minimum of 7.5% public spread for listed entities (companies have 24 months to comply). CIMB Niaga’s current public float is 3% and it will work to fulfill this requirement.

CIMB Group (CIMB) is expected to release its 4Q13 result on 25 Feb afternoon. The weaker Rupiah vs Ringgit is expected to drag CIMB Niaga’s contribution to CIMB Group. We estimate CIMB Niaga to contribute 30% of Group PBT in FY13 vs 34% a year ago. 

Source: HwangDBS Research - 19 Feb 2014