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CIMB Niaga eyes consumer, SME loans after issuing bonds
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We sell bonds: (From left to right) CIMB Niaga strategy and finance director Wan Razly Abdullah, president director Tigor M. Siahaan, compliance, corporate affairs and legal director Fransiska Oei and treasury and capital market director John Simon talk on the sidelines of the lender’s public expose in Jakarta on Monday. (JP/Wendra Ajistyatama)
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ublicly listed lender CIMB Niaga is looking to expand its consumer and small and medium-sized enterprise (SME) loans after securing fresh funds of up to Rp 2.5 trillion (US$193 million) in an ongoing bonds issuance.
The bank, part of Malaysian lending giant CIMB Group, is looking to raise Rp 1 trillion to Rp 2.5 trillion in a bonds issuance, with all of the proceeds allocated for loan expansion as part of a greater plan to issue Rp 8 trillion worth of bonds over the next two years.
Book building runs from Oct. 3 to 17, allotment is scheduled for Nov. 1 and public listing for Nov. 4. The bonds will come in three series: Series A, with on-year maturity and coupon rates of between 6.5 percent and 7.25 percent, Series B with five-year tenure and 7.25 percent to 8 percent coupon rates and Series C with five-year maturity and between 7.6 percent and 8.35 percent coupon rates.
“We are optimistic the bonds issuance will attract investors,” said CIMB Niaga president director Tigor M. Siahaan on Monday. The bank’s first half performance, however, has not been strong.
All of the proceeds from the bonds issuance will be used to fund the firm’s credit expansion although Tigor admitted that the nationwide banking industry’s loan growth would remain weak.
Single digit growth of around 6 percent to 8 percent by the end of the year seems realistic because demand remains lackluster, he said. The bank’s target, he added, was in the lower bound of Bank Indonesia’s (BI) loan growth projection of between 7 percent and 9 percent for this year.
“However, we target higher growth for some of our credit segments, namely consumer and SME loans, relative to corporate and commercial ones,” Tigor told journalists.
CIMB Niaga, the second largest private lender in Indonesia, saw loan growth contract 3 percent as of June year-on-year (yoy) to Rp 175.34 trillion, of which consumer and SME loans contributed 30 percent and 20 percent, respectively.
“Weakness in demand persists in the market,” said Tigor. “We can’t force the market as we also look at risks and portfolio balancing. We don’t want to force our credit disbursement to grow but in a low-quality way.”
Tigor expressed optimism that growth in the consumer and SME segments would exceed the industry’s growth while the corporate and commercial sectors would lag behind.
“In the long run, our strategy is to focus on consumer and SME credits because the non-performing ratios in those segments are small,” said the lender’s chief finance officer, Wan Razly Abdullah. Corporate loans, he went on to say, could grow more quickly but were riskier.
After seeing bad loans soar last year from its commodities clients, CIMB Niaga has grown selective in disbursing loans, Wan Razly said.
Its gross NPL stood at 3.9 percent as of June, lower than 4.28 percent in the same month last year and well below a healthy level of 5 percent set by financial regulators.
In the first half of the year, CIMB Niaga booked Rp 736 billion in net profits, a 318.2 percent surge from the same period a year ago, thanks to lower provisions and higher fee-based incomes and after selling off its bad assets amounting to Rp 3 trillion earlier in the year.
