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CIMB Niaga seeks to improve asset quality in 2017
Publicly listed lender CIMB Niaga, part of Malaysian financial institution CIMB Group, is seeking to improve asset quality this year on the back of various global events
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ublicly listed lender CIMB Niaga, part of Malaysian financial institution CIMB Group, is seeking to improve asset quality this year on the back of various global events.
CIMB Niaga strategy and finance director Wan Razly Abdullah said the bank was positive that it would be able to book favorable performance in 2017 as it did in 2016.
Its latest financial report shows that it reaped Rp 2.08 trillion (US$156 million) of net profit last year, almost a fivefold increase compared to 2015, even though its loans only surged 1.6 percent year-on-year (yoy) to
Rp 180.16 trillion.
He, however, acknowledged that risks remained that stemmed from the current global situation. “The market is expected to be soft in the first quarter due to the Trump effect, Brexit and China slowing down,” he told The Jakarta Post on Monday.
As reported before, the financial market reacted with concerns when Donald Trump won the US presidential election in November, leading to tumbling oil prices, rising gold and sinking stocks.
The surprising victory followed in the footsteps of the unexpected outcome of the United Kingdom’s membership referendum to leave the European Union, widely known as “Brexit”, in June. Sterling plummeted when the result came out and investors pulled their funds out of UK-based stocks.
Meanwhile, China is continuing its slowdown and President Xi Jinping seems open to growth in China falling below 6.5 percent, as reported by Bloomberg.
All in all, the global situation may find its way to Indonesia and affect domestic financial markets and firms, many of which rely on banks for financing.
CIMB Niaga was badly hit by non-performing loans (NPL) several years back as a result of a weakening economy and falling commodity prices, forcing the lender to restructure its loans.
“We will focus on increasing our underwriting standards and pushing for improving asset quality,” Wan Razly said.
Recent data from CIMB Niaga shows that its net NPL ratio climbed to 2.2 percent at the end of 2016 from 1.6 percent in 2015, while its gross NPL ratio stayed flat between 3.7 to 3.8 percent.
The bank will keep an eye on commodity price weakness and monitor whether it will flow into the consumer segments. Despite current price increases, it says it is too early to know if the increases will last.
According to CIMB Niaga’s financial report, consumers account for its second-largest loan segment, making up 29 percent after corporate banking at 34 percent.
The outstanding amount of its consumer loans dropped 1.1 percent annually to Rp 51.42 trillion as of December.
Similar to overall loans, CIMB Niaga only managed to jack up its customer deposits by 1.1 percent to Rp 180.57 trillion. It ended the year with tight liquidity as shown by its loan-to-deposit ratio (LDR) of 98.4 percent.
Meanwhile, another publicly listed lender Bank Tabungan Pensiunan Nasional (BTPN) recorded a 3 percent annual increase to Rp 1.75 trillion in net profit in 2016.
Its outstanding loans surged 8 percent yoy to Rp 63.17 trillion, with the productive poor and small and medium enterprise segments posting the highest growth rates at 36 percent and 35 percent, respectively.
BTPN’s customer deposits were up 10 percent on an annual basis to Rp 66.2 trillion, as shown by its financial report.
In a statement, BTPN president director Jerry Ng said it spent Rp 611 billion to develop its digital services in 2016.
“The technology spending surely jacked up our operational costs, but we are optimistic that the investment will give positive and significant impacts to the company in the future,” he said.
