CIMB Group - Healthy fee income in 3Q for CIMB Niaga Buy

- CIMB Group Holdings Bhd’s (CIMB) 97.9%-owned Indonesian subsidiary PT Bank CIMB Niaga Tbk (CIMB Niaga) recorded a healthy earnings  growth of 6.8% QoQ, bringing annualised earnings to 10% above our forecasts. We estimate CIMB Niaga’s net earnings contribution at 37% in 3QFY12, vs. 31% in 2QFY12, based on our prorated group forecast for FY12F. 

- Loans growth had slowed to 1% QoQ in 3QFY12 from 6% QoQ in 2QFY12, due mainly to lumpy corporate repayments, as well as continuing effects from CIMB Niaga’s withdrawal from the mortgage loans segment (14% of total loans) which expanded only 1% QoQ in 3QFY12 vs. 4% in 2QFY12. Looking ahead, the company alluded to likely adopting a more active stance in selected mortgage segments (with focus on properties out of Jakarta as well as selected customers for cross-selling purposes). Loans growth guidance is now lowered to 15% to 16% FY12F from 18% previously. 

- Despite the slower loans growth, the company had managed to maintain NIM at 5.90% in 3QFY12, vs. 5.93% in 2QFY12. This was likely due to a higher contribution from its commercial loans segment (contributed 38.1% to total loans in 3QFY12 from 36.9% in 2QFY12), which includes higher-yielding loans from the micro segment.  

- Non-interest income continued to benefit from some  gains in treasury bonds (3Q: Rp155bil, 2Q: Rp191bil; 1Q: Rp462bn), with the company hinting of healthy marked-tomarket gains for its existing bonds portfolio. The other portion which had seen healthy growth year-to-date is fees from its third-party forex flow business, which is about Rp300bil YTD. The company expects growth to be boosted from further corporate customer flows, as well as the consumer segment with better live-feed services arising from IT upgrading.   

- Gross NPL ratio was lowered to 2.41% in 3QFY12 from 2.52% in 2QFY12 while gross impaired loans ratio also improved, to 2.84% in 3QFY12m from 3.29% in 2QFY12, attributed to good recoveries. Absolute levels of gross NPL and impaired loans declined by 3.4% QoQ and 12.8% QoQ, respectively, which is positive. CIMB Niaga’s 3Q is decent despite a slower loans growth, with non-interest income growing steadily and asset quality improved. Maintain BUY on CIMB with a fair value of RM9.70/share.

Source: AmeSecurities