PETALING JAYA: CIMB Group Holdings Bhd
’s 92.4%-owned subsidiary in Indonesia, CIMB Niaga, is likely to face near-term earnings pressure from weaker net interest margins (NIM) and higher credit costs, although stronger fee income and disciplined cost control should provide some cushion.
The group’s broader geographical exposure and attractive dividend yield, meanwhile, should continue to support its earnings resilience and investment appeal.
MBSB Research said CIMB Niaga faces a tougher operating environment after management revised down its financial year 2026 (FY26) targets for NIM, cost of credit and return on equity.
“Although the loan growth outlook is not the brightest, achieving the lower bound of the guidance still seems possible,” it said.
The research house expects cost control and stronger fee income to remain key drivers of earnings growth, with operating expenses well contained, particularly for technology and personnel.
It also highlighted the growing contribution from non-interest income (NOII), with bancassurance and funding and administration fees providing a more stable source of revenue.
However, NIM is becoming a bigger concern as the Indonesian bank contends with deposit competition following Bank Indonesia’s recent interest rate movements.
MBSB Research said CIMB Niaga expected NIM to compress in the following quarter as competition for deposits intensified, forcing the bank to rely more heavily on fixed deposits given its 90.4% loan-to-deposit ratio.
Loan growth could also prove more challenging as CIMB Niaga shifts towards lower-risk and lower-yielding segments.
The bank is exiting higher-risk, higher-yielding areas such as buy-now-pay-later channelling and fintech lending, while focusing more on lower-yielding loans.
This could limit its ability to pass on higher rates, particularly in the commercial and small and medium enterprise segments.
CIMB Niaga estimates only about 70% of its business book has been repriced so far.
Hong Leong Investment Bank (HLIB) Research remained cautiously positive on the Indonesian franchise, citing above-guidance loan growth and improving recurring fee income.
“Near-term earnings could face headwinds from deposit competition and elevated funding costs, while NIM recovery hinges on loan repricing velocity post-Bank Indonesia rate hike in June 2026.”
It said asset quality remained encouraging, with gross impaired loans and loan-at-risk trends improving, supported by comfortable capital and liquidity buffers.
For the second half of FY26 (2H26), revenue diversification, current account and savings account retention and disciplined growth should help cushion earnings pressure.
Kenanga Research also sees a dimmer NIM outlook, noting that CIMB Niaga’s NIM eased to 3.85% in the second quarter of FY26 (2Q26), down eight basis points year-on-year (y-o-y), following repricing from rate cuts.
It said the ability to lift loan yields would depend partly on discussions with customers, particularly amid a difficult growth environment in small and medium enterprise and commercial banking.
CIMB Niaga has lowered its NIM guidance by 10 basis points, with deposit competition adding to the pressure.
Still, Kenanga Research said the bank’s move towards corporate lending offered a lower-risk avenue, while exiting fintech lending could trade some NIM for improved asset quality.
On CIMB Group, MBSB Research maintained its “buy” call with a target price of RM9.29.
HLIB Research also kept its “buy” rating with a target price of RM8.70, while Kenanga Research maintained its “outperform” call at RM8.45.
CIMB Niaga’s 2Q26 core earnings came in at 1.67 trillion rupiah, down 5.3% quarter-on-quarter but up 1.3% y-o-y, bringing 1H26 profit to 3.44 trillion rupiah, down 0.5% y-o-y.
Revenue rose 7.1%, driven by a 21.2% increase in NOII, although a sharp rise in provisions more than offset the benefit from positive cost-to-income jaws and a lower effective tax rate.
Meanwhile, one analyst highlighted that CIMB’s diversified regional footprint should help cushion the softer operating environment in Indonesia.
“The group’s strong capital position and dividend profile provide further support for the overall investment case,” he told StarBiz.
