CIMB Niaga’s FY21 CNP of IDR4.22t (+101%) is within expectation. Going forward, the group is likely to continue gaining market share in FY22 by capitalising on economy revitalisation. However, NIM normalisation may undermine earnings potential. For now, we may also expect operational efficiency to be sustained with some thanks to better digital capabilities. We keep our group-level estimates unchanged for now. Maintain MP and TP of RM5.20 for the group.

FY21 earnings higher than expected. 91.5%-owned CIMB Niaga (Niaga) reported FY21 earnings of IDR4.22t which was within expectation, making up 105% of estimate. Typically, Niaga makes up 15-20% of the CIMB Group’s PBT.

YoY, FY21 reported a NII of IDR13.09t (+5%) which came from a large loans base (+4%). NIMs were slightly weaker at 4.75% (-5bps) following certain reversals to reflect actual underlying levels. Still, cost of funds remains light as CASA mix stood at 61.3% (+0.7ppt). Meanwhile, NII (15%) remained to be supported by better fees and commission performance. CIR improved to 47.5% (-2.0ppt) as the stronger top-line outweighed the slight increase in opex. Alongside softer provisioning needs (-23%) with a credit cost of 232bps (-59bps), FY21 core PATAMI clocked in at IDR4.22t (+101%).

QoQ, 4QFY21 was sequentially flattish as NIM corrections (-46bps) shifted NII by 5% but it was supported by solid NOII results (+20%). Regardless, 4QFY21 earnings reported in 6% lower being undermined by higher expenses (+5%) and higher closing impairments (annualised credit cost at 237bps, +25 bps).

Taking more ground in FY22. With the close of FY21 books, management is hopeful that will perform better in customer acquisition with a 4-6% loans growth target in mind (FY21: 3.9%), also backed by strong economic recovery in a previously suppressed economy. However, the heydays of high NIMs will likely not repeat as the effects of repricing will be more prevalent and could lead to softness of up to 20bps. That said, management is confident that operational efficiency will remain intact (FY22 CIR target: <45.9%; FY21: 45.9%) and that should translate meaningfully to group fundamentals. FY22 is

marked with a ROE target of 11-12% (FY21: 10.7%).

Post Niaga’s results, we leave our earnings forecasts for CIMB unchanged for now, pending group-level earnings results to be released end-Feb 2022.

Maintain MARKET PERFORM and TP of RM5.20. Our TP is based on an unchanged GGM-derived PBV of 0.84x on FY22E PBV (0.5SD below mean). Following the recent industry-wide rally, we believe there might be little upside to the stock’s performance for now. Still, patient investors may look towards the stock’s modest dividend returns which are expected to improve as we move to a post-pandemic landscape. At present, CIMB has the highest GIL ratio (~4%, vs ~2%) and lowest ROE (<9%, vs ~10%) amongst its large cap peers.

Risks to our call include: (i) higher/lower-than-expected margin, (ii) higher/lower-than-expected loans growth, (iii) better/worse-than-expected movement in asset quality, (iv) stronger/weaker capital market activities, (v) favourable/unfavourable currency fluctuations, and (vi) changes in OPR.

Source: Kenanga Research - 22 Feb 2022