Niaga: FY21 results within expectations
Maintain HOLD on CIMB Group for now
Niaga’s FY21 net profit was within expectations but we upgrade FY22-24E net earnings by 8-14% on the back of lower credit cost assumptions. This translates to a potential 2-4% uplift to CIMB Group’s earnings. We maintain our group forecasts for now pending the release of CIMB Group’s results on 28th Feb, as well as our HOLD call and TP of MYR5.40, pegging on a FY22 PBV of 0.9x (ROE: 8.5%).
Within expectations
Niaga’s 4Q21 net profit of IDR992b (+570% YoY, -7% QoQ) took FY21 net profit to IDR4.23tn (+110% YoY). This was within our expectations. Operating profit growth of 14% in FY21 was driven predominantly by robust NOII growth of 15%, while net profit more than doubled on lower credit cost. We upgrade Niaga’s FY22/23/24E net profit by 8%/14%/14% respectively on the back of lower credit cost assumptions. We expect Niaga to contribute to about 28% of CIMB Group’s earnings in FY22.
Expects credit cost to remain elevated
Niaga’s impaired loans ratio was a higher 6.7% end-2021 vs 6.0% end-2020, while loan loss coverage (LLC) was 109%. Positively though, its loans at risk (LAR) ratio was a lower 15.9% versus 23.6% end-2020, with a higher LLC of 45.6% from 29.5% end-2020. Management guides for lower but still elevated credit cost of 2.1-2.3% in FY22 (2.4% in FY21), as it remains cautious over the operating environment and continues to build provisions against LAR.
Guidance for FY22
Niaga guides for faster loan growth of 4-6% in FY22 (FY21: 3.9%; MIB FY22E: 5%), -20bps in NIM (FY21: 4.86%; MIB: -15bps), credit cost of 2.1-2.3% (FY21: 2.4%; MIB: 2.2%) and cost/income ratio <45.9% (FY21: 45.9%; MIB: 43.9%). It also targets a higher ROAE of 11-12% versus 10.7% in FY22.