1Q16 core earnings of IDR269b was below expectations, accounting for 13% of our and consensus estimates. No dividends announced as expected. Earnings for the Group are unchanged with TP of RM4.46 and our UNDERPERFORM call is maintained.
CIMB Niaga 1Q16 net profit was below expectations but registered a 224% jump in net profit growth attributed to stellar performance from Non-Interest Income (NOII) and lower provisioning.
3M16 vs. 3M15, YoY
1Q16 vs. 4Q15, QoQ
Niaga's performance is likely to improve further in FY16, being a beneficiary of the infrastructure spending announced, stronger rupiah against the dollar, lower inflation and interest rate cut by 75bps since early this year. However, asset quality issues should continue to linger (gross NPL ratio to stay at elevated levels), since commodity prices remain challenging. Management still maintains its guidance of: (i) loan growth of around 7-8%, and (ii) NIMs trending below 5%. Management added that loan provision remains elevated while no new corporates in the NPL books and provisions are mainly top-ups in the existing accounts, mainly from its commodities portfolio.
Source: Kenanga Research - 3 May 2016
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