KUALA LUMPUR: CIMB could see an earnings recovery in 2027 as loan repricing supports net interest margins and the impact of higher credit provisions at its Indonesian subsidiary eases, according to AmInvestment Bank Research (AmResearch).
The research house said investors could consider accumulating CIMB shares on weakness, arguing that much of the negative news surrounding its 93%-owned Bank CIMB Niaga Tbk (Niaga) appeared to have been priced in.
“While we acknowledge Niaga’s consecutive weak results are tough pills to swallow, in our view, 2027 could mark a turning point,” AmResearch said.
It added that provision-driven earnings weakness had historically tended to be temporary, particularly when the charges were made pre-emptively and underlying asset quality remained sound.
“Meanwhile, gradual loan repricing should aid NIM recovery,” the research house said, referring to net interest margin (NIM).
AmResearch maintained its “Buy” call on CIMB with an unchanged target price of RM9.80, based on 1.36 times its forecast price-to-book value for the financial year ending 2027 (FY27). The valuation multiple is broadly in line with Maybank’s 1.35 times, given their similar return-on-equity profiles, it said.
The research house estimated that Niaga and TNG Digital could collectively be worth RM1.70 per CIMB share, but believed the market was assigning little or no value to both businesses.
Its positive longer-term view comes despite another earnings shortfall at Niaga, which reported a third-quarter 2026 net profit of IDR1.056 trillion, down 42% year-on-year and 37% quarter-on-quarter.
This brought its cumulative nine-month net profit to IDR4.492 trillion, a 15% decline from the corresponding period last year.
The results fell below both AmResearch’s and consensus estimates, accounting for only 63% of their respective full-year forecasts. Softer-than-expected NIM and higher loan loss provisions were the main reasons for the shortfall.
Niaga also lowered its NIM and return-on-equity guidance by 10 basis points and 50 basis points respectively, prompting AmResearch to cut its FY26 earnings forecast for CIMB by 2%.
However, the research house said the sharp increase in provisions was partly attributable to regulatory changes and precautionary measures rather than a broad deterioration in borrowers’ credit quality.
Credit provisions rose 70% year-on-year and 64% quarter-on-quarter, mainly due to Indonesia’s Financial Services Authority’s (OJK) revised treatment of repossessed vehicles and pre-emptive provisions against the consumer loan portfolio.
These factors accounted for about 40% of Niaga’s third-quarter allowances. Excluding them, provisions would have been broadly stable on both a yearly and quarterly basis, AmResearch said, adding that Niaga expected the impact to be one-off.
“More importantly, the underlying AQ picture tells a different story,” it said.
Niaga’s loan-at-risk (LAR) ratio improved by 70 basis points quarter-on-quarter, while its gross impaired loan (GIL) and non-performing loan (NPL) ratios declined by 50 basis points and two basis points respectively. Loss coverage remained healthy at between 100% and 120%.
Nevertheless, near-term pressure on profitability remains a concern. Niaga’s NIM continued to decline both year-on-year and quarter-on-quarter, while treasury risk-taking income plunged by more than 90%, further weighing on earnings.
AmResearch cautioned that the prospect of further Bank Indonesia rate hikes and intense competition for deposits could continue to constrain NIM in the near term.
“Nevertheless, loan repricing would gradually catch up, paving way for a 2027 recovery,” it said.
The research house also pointed to resilient fee income, which grew between 5% and 21% year-on-year over the past five quarters, while tighter cost controls could improve operating efficiency.
Overall, AmResearch believes CIMB’s longer-term recovery potential remains intact despite the weakness in Niaga’s latest results.