INVESTMENT HIGHLIGHTS

• Strong FY16 net profit growth of +119%yoy supported by robust NII growth

• OPEX was contained while provisions lower

• Decent loans and deposit growth. However, solid growth in CASA franchise

• Asset quality a concern but improving

• No change to our forecast for now

• Remains cautiously optimistic of the Group’s prospect. Maintain BUY with unchanged TP of RM5.90 pegging the stock to 1.1X Price-to-Book multiple

Strong FY16 net profit growth. CIMB Niaga registered an excellent set of FY16 result. Core net profit came in strongly with +119%yoy growth to Rp1.88t. This is excluding one-off fee income of Rp276b in FY16 and MSS cost of Rp571b in FY15. Otherwise, net profit grew +386.4%yoy. The stellar net profit growth were due to; (1) Robust NII growth, (2) Strong NOII growth, (3) Contained OPEX, and (4) Lower provisions.

Better NII on improved liability management. NII grew +6.2%yoy to Rp12.09t despite -4.5%yoy decrease in interest income, as CIMB Niaga managed to improved its funding cost. Interest expense fell -15.6%yoy, amongst other things, from a decrease in the more expansive time and structured deposits. Hence, NIM improved by 43bps yoy to 5.64%. Meanwhile, the higher NOII was mainly due to growth in forex and fixed income derivatives (+169.2%yoy to Rp673b), and fees & commissions (+3.7%yoy to Rp1.75t).

Controlled cost well, while provisions lower. OPEX grew only +1.9%yoy to Rp7.37t as personnel expenses were contained. CI ratio fell below the 50% level at 49.4%. Provisions fell -7.2%yoy to Rp4.97t, resulting in improved cost of credit, by -29bps yoy to 2.73% on higher loans growth

Source: MIDF Research - 21 Feb 2017