CIMB credit costs to normalise amid portfolio rebalancing
Credit costs represent the provisions banks allocate to cover potential loan defaults or non-performing loans.
Hong Leong Investment Bank Bhd (HLIB Research) noted that with liquidity conditions remaining tight, funding costs are expected to remain under pressure.
"However, management continues to highlight efforts to rebalance its loan portfolio towards higher-yield assets and to grow its fixed-rate loan book, including hire purchase, unsecured, and personal financing, taking into account the possibility of further benchmark rate cuts by Bank Indonesia.
"Separately, loan exposure to tariffs remains insignificant, accounting for less than 1.5 per cent of Niaga's loan portfolio.
"Therefore, we do not foresee any major deterioration in asset quality.
"Loans at risk (LAR) remained stable quarter-on-quarter, and large buffers are in place to cushion any potential spike in the gross impaired loan (GIL) ratio," it said in a note.
Meanwhile, HLIB Research also noted that CIMB Niaga posted commendable 1Q25 results, which came in within estimates despite prevailing market conditions.
It said the earnings growth of 7.4 per cent year-on-year (YoY) was supported by lower credit costs and a reduced tax rate.
"Additionally, loan growth momentum remains robust, bringing the reported loan-to-deposit ratio (LDR) to 89.3 per cent.
"Furthermore, CIMB Niaga continues to focus on higher-yielding products while strategically rebalancing its loan portfolio to capitalise on potential rate cuts by Bank Indonesia," it noted.
Overall, HLIB Research has maintained a "Buy" call on CIMB Group with a target price of RM9.20.
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