HOLD maintained on CIMB Group
Niaga’s 1Q22 results were within our expectations and our forecasts for CIMB Group are maintained, pending the release of the group’s results on 31 May. We expect Niaga to contribute to 32% of group earnings in FY22. We maintain a HOLD on CIMB with an unchanged TP of MYR5.60 (FY23 PBV of 0.9x, ROE: 9%)
Niaga’s 1Q22 results within expectations
Niaga’s 1Q22 core net profit of IDR1.19tn (+20% YoY/QoQ) was within our expectations at 25% of our full-year net profit forecast. Support to earnings came predominantly from higher NOII (+22% YoY) and lower credit cost (-9% YoY). Loan growth picked up pace to 5.3% YoY in 1Q22 from 3.9% in 2021. NIMs contracted YoY but were stable QoQ. Credit cost was higher QoQ due to management overlays on corporate/commercial loans.
NIMs to improve
1Q22 NIM was 4.46% against guidance of about 4.66% (-20bps YoY) for the year. Nevertheless, management believes that NIMs have troughed (had improved to 4.6% in March) and should move higher from hereon.
Targets still hold
Niaga’s earlier targets still hold: loan growth of 4-6% in FY22 (1Q22: 5.3%; MIB FY22E: 5%), -20bps in NIM (MIB: -15bps), credit cost of 2.1-2.3% (1Q21: 2.4%; MIB: 2.2%) and cost/income ratio <45.9% (1Q22: 43.8%; MIB: 43.9%). It also targets a higher ROAE of 11-12% versus 10.7% in FY22 (1Q22: 11.8%).