Bank CIMB Niaga (BNGA IJ): FY18: Above Expectations; EPS Up 17% YoY
(Alvin Baramuli, Henry Wibowo - RHB Research)
Maintain BUY, IDR1,550 TP offers 25% upside with 2% FY19F yield. Bank CIMB Niaga recently hosted its FY18 conference call, where CEO Mr Tigor Siahaan, newly-appointed CFO Mr Lee Kai Kwong and the board of directors were present. 4Q18 earnings of IDR890bn (+8% QoQ, +14% YoY) was driven by non-II and improvement in CoC, which brought FY18 net profit to IDR3.5trn (+17% YoY), at 102% of both RHB and Street estimates – above expectations. Loan growth remained soft at 1.8% YoY (9M18: +2.2%) on its subdued commercial, corporate and auto segments. Our rating on the stock is premised on its attractive valuation (0.7x P/BV, ie cheapest in our coverage), improving loan outlook and steady credit cost.
FY18 earnings driven by non-II and provisions. Net interest income in FY18 dipped 3.2% YoY (4Q18: -0.8% QoQ, -1.1% YoY) due to a higher interest expense post a 175bps hike in Bank Indonesia’s 7-day reverse repo rate. Accordingly, NIM narrowed to 5.1% in FY18, vs 5.6% in FY17 – although this is at a steady level when compared with 9M18’s 5.1%. Earnings were driven by higher non-II, which mainly came from syndication fees (+112% YoY) though PPOP was still down 4.3% YoY (4Q18: -0.9% QoQ, -8.9% YoY) on higher opex (+5.7% YoY, 4Q18: -2.9% QoQ, +3.7% YoY). Provision expense was down to 25.7% YoY (4Q18: -5% QoQ, -22% YoY), improving CoC to 1.6% (9M18: 1.7%, FY17: 2.2%) – the lowest since 2014. Management expects CoC to be steady around 1.5% going forward, due to further improvement in asset quality.
FY18 loans growth soft at 2%, but serves as an upside. Total loans stood at IDR188.5trn, up 1.8% YoY vs 2.2% in 9M18. Management expects 2019 loan growth, at mid-single digits, to be driven by consumer and SME – with potential upside from top-tier corporates and infrastructure-related drawdowns. It also expects to see an acceleration in economic activity in 2H19 – which could lead to potential high single-digit loans growth.
FY18 NPL improved to 3.1%, LDR at 97%. Asset quality improved, with NPL dropping to 3.1% for FY18 from 3.4% in 9M18 (FY17: 3.8. Additionally, total deposits increased by 0.8%, with CASA (53%) up 0.9%, while time deposits ticked up by 0.6%, bringing the LDR to 97% (9M18: 92%, FY17: 96%).
Report Link:
https://research.rhbtradesmart.com/attachments/63/rhb-report-ind_cimb-niaga_results-review_20190221_rhb-593735010654253155c6dd0aea85ed.pdf
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