CIMB surprisingly expects 15% loan growth for FY13

Find out what else to expect from CIMB this year.

At the company analyst briefing, Nomura was pleasantly surprised that management is expecting strong loan growth of ~15% for FY13F, contrary to the analyst's expectations of a slowdown in loan growth. 

Here's more from Nomura:

According to management, the corporate loan pipeline is looking strong, CIMB Niaga is expected to maintain its high-teens growth rate and the consumer business should see a turnaround following an internal restructuring of the division.

Meanwhile, management expects NIMs to be flat to slightly down. On a less positive note, management looks for credit cost to revert to normalised levels after a few exceptional years of general provisioning release.

On capital management, CIMB intends to increase the group’s core equity Tier-1 ratio from the present 8% to 10% by 2015. The dividend reinvestment programme announced recently aims to support a dividend  policy of 40-60% and retain more capital.

Following the disposal of the life insurance business, another non-core asset that was identified was the group's insurance business in Indonesia but management has not committed to any definite plans for now.

CIMB Niaga performed well in 2012 with net earnings growing at 30% in spite of relatively low loan growth of 15-18%. This was driven mainly by stronger NIMs as the bank maintained a more disciplined approach to competing for deposits and writing loans.

That said, 2013 will likely see lower NIMs as Indonesia’s sovereign rating looks set to continue to improve over the long run. Liquidity for the US dollar is still relatively tight, but management noted its US-dollar loan- deposit ratio is at a healthy 60%.

Management expects capital markets revenue to see modest growth this year. It noted that 2013 is unlikely to be a repeat of last year's chunky IPOs (Felda Global, IHH) but the rates and FX business is growing strongly. In-country capabilities in Malaysia, Singapore, Thailand and Indonesia have been built up and management will push harder on cross-border opportunities.

A good example was the F&N deal where CIMB participated as an advisor to the OUE group of Indonesia. Management also cited opportunities in retail cross-border remittances, which is still at an early growth stage. The RBS business acquired last year should break even this year, according to management.

Group NIMs are expected to hold up well this year. Last year, CIMB outperformed the sector due to better NIMs in Indonesia and Singapore (change in loan mix in favour of commercial/corporate). This year, although CIMB Niaga is likely to see narrower margins, it is still expected to contribute positively to the group with a high >5% NIM and stronger loan growth.

In Malaysia, the bulk of the NIM pressure is coming from the replacement of the mortgage book where the difference between the portfolio yield and new loans being booked is as high as 1%. On a positive note, asset yields have been relatively stable with mortgages being priced higher than BLR minus 2.5%. Even in deposits, the stiff competition seen in 1H12 has largely dissipated.