CIMB Group Holdings - Sustained non-interest income performance in 4Q BUY

- CIMB Group Holdings Bhd’s (CIMB) 97.9%-owned Indonesian subsidiary PT Bank CIMB Niaga Tbk (CIMB Niaga) recorded a robust 24.6% YoY increase in net earnings in FY12, and was ahead of our forecasts by 16%.   

- We estimate net earnings contribution of 31% to group’s net earnings in FY12, which is a  steady increase from 29% in FY11. 

- Total loans grew by 5% QoQ and 16% YoY, driven mainly by the commercial segment, primarily the micro finance and higher-end SMEs. Total deposit growth was 3% QoQ, but CASA growth was stronger at 5% QoQ. This takes the CASA ratio to 43.5% in 4QFY12, better than 3QFY12’s 42.8%. The higher CASA growth was attributed to its emphasis on convenience via its internet and mobile banking channels.  

- NIM eased by 12bps QoQ in 4QFY12 (3QFY12: -3bps), due mainly to ongoing competition for loan. On a full year basis, NIM improved significantly by 24bps YoY, attributed to higher LDR utilisation, and improvement in CASA contribution. The YoY improvement was also due to the absence of aggressive deposit pricing campaign (leading to higher costs of funds), which were ceased a year ago. The company expects NIM to decline by circa 15 to 20bps YoY in FY13 due largely to pricing competition in the loan segment. 

- More importantly, non-interest income was sustained at Rp741bil in 4QFY12 (3QFY12: Rp738bil), with the treasury income holding well at Rp151bil in 4QFY12 (3QFY12: Rp155bil). 

- The company indicated that the treasury profits from forex activities had remained healthy due to improved traction from the corporate segment, while retail forex volume continued to be boosted by more competitive rates and live-feed services. 

- CIMB Niaga’s results provided further proof that non-interest income will likely sustain, with healthy growth in treasury and fee income despite market expectations of lower spreads and volume in 4QFY12. In addition, we are also positive on CIMB Niaga’s CASA growth, which did particularly well in 4QFY12. Maintain BUY on CIMB with a fair value of RM9.70/share.

Source: AmeSecurities