PETALING JAYA: CIMB Group
Holdings Bhd's earnings outlook remains stable but increasingly dependent on domestic performance, even as its Indonesian subsidiary, PT Bank CIMB Niaga Tbk (Niaga), delivered a commendable start to the financial year.
Analysts are cautiously optimistic about CIMB’s overall trajectory, citing currency headwinds and regional funding pressure as potential drags on group-level earnings.
Kenanga Research noted that Niaga kicked off 2025 with a strong showing, underpinned by loans growth, net interest margin (NIM) and credit cost falling within the guided range.
The brokerage added that while Indonesia's deposit competition is “unrelenting”, Niaga is navigating the liquidity squeeze with a targeted loan-to-deposit ratio (LDR) of 90%.
It remarked, “Niaga expects it will operate comfortably at a LDR ratio of 90% and will defend NIMs by targeting higher yielding fixed-rate markets such as small and medium enterprises, hire purchase, unsecured segments.”
Despite this, Kenanga Research pointed out that CIMB's earnings growth prospects are “most likely [to] hinge on its Malaysian operation’s efforts to boost wholesale banking businesses as well as driving its fee-based income.”
It maintained an “outperform” call on CIMB, with a target price of RM7.90, while acknowledging that Niaga’s overall contributions to the group would be eroded despite the latter meeting its targets and street estimates.
TA Research echoed a broadly positive tone, stating, “Overall, the first quarter (1Q) was a solid start to the year, with Niaga demonstrating good momentum despite macroeconomic headwinds and global uncertainties.”
It emphasised Niaga’s commitment to a deposit-led strategy and noted that its contribution to the group’s pre-tax profit was 25% in 2024. However, the research firm cautioned that foreign exchange volatility could weigh on reported earnings.
“While Niaga posted a healthy performance in 1Q25, its contribution to the group's earnings may be slightly lower this quarter due to the recent depreciation of the Indonesian rupiah.”
TA Research estimated that a 10% rupiah-depreciation could reduce group pre-tax profit by 2%–3%, though it held its earnings forecast unchanged and reaffirmed a “buy” rating on CIMB, with a target price of RM8.34.
Hong Leong Investment Bank (HLIB) Research also retained a constructive stance, citing Niaga’s ongoing portfolio rebalancing efforts and adequate buffers to support asset quality.
“We anticipate credit costs to trend closer to one percentage point in the upcoming quarters, similar to typical business-as-usual levels, barring any significant writeback,” it said.
With large loss coverage and stable loans-at-risk, the firm believes any deterioration in asset quality would be manageable.
HLIB Research maintained a “buy” call on CIMB, with a higher target price of RM9.20, arguing that CIMB remains the cheapest big-cap bank under our coverage, trading at less than 10 times price-earnings ratio and one time price-to-book value, with a compelling dividend yield of 7%.
Niaga recently reported a 7.37% year-on-year rise in net profit for 1Q2025 to 1.8 trillion rupiah (RM466.1mil), buoyed by a 6.65% increase in interest income. Its gross non-performing loans (NPL) ratio improved to 1.85% from 2.14% a year earlier.
Niaga president director Lani Darmawan attributed the strong results to disciplined execution. “Our profit and asset quality grew strongly, with gross NPL improving, reflecting our disciplined risk management approach. We continue to build a strong foundation through prudent growth and strategic investments that support long-term value creation,” she said.
