KUALA LUMPUR (Oct 30): CIMB Group Holdings Bhd's 97.94%-owned Indonesian unit PT Bank CIMB Niaga Tbk saw its net profit for the nine months ended Sept 30, 2015 (9MFY15) fall 88.45% to 265 billion rupiah from 2.3 trillion rupiah a year ago, due to higher provision expenses.

Its earnings per share fell to 10.56 compared with 91.36 a year ago.

In a statement today, CIMB Niaga said the 9MFY15 net profit was lower year-on-year due to a 163.6% y-o-y increase in provision expenses on the back of weaker economic conditions and an increasingly challenging operating environment. However, it pointed out that the provisions for the third quarter ended Sept 30, 2015 (3QFY15) have improved gradually over the past two quarters.

The bank reported a consolidated business as usual net profit of 442 billion rupiah in the third quarter of 2015 excluding the exceptional expense of 471 billion rupiah from the mutual separation scheme in the current quarter under review.

CIMB Group Holdings Bhd and CIMB Niaga had completed their individual MSS exercise in July.

The exercise involved 3,599 applications (1,891 from Malaysia and 1,708 from Indonesia).

Meanwhile, the 9MFY15 operating income grew 4.8%, underpinned by a 9.5% year-on-year (y-o-y) growth in net interest income but partially offset by a 13.3% y-o-y decline in non-interest income.

The gross non-performing loan ratio improved to 3.17% as at 30 Sept, 2015, compared with 3.35% as at the same period a year ago as a result of sales of asset to an affiliated company of CIMB Group. CIMB Niaga’s loan loss coverage increased to 120.96% as at Sept 30, 2015 from 82.89% a year ago.

CIMB Niaga said it still maintained its position as Indonesia's fifth largest bank by assets, with total assets of 244.29 trillion rupiah as at Sept 30, 2015, representing a 7.3% y-o-y increase.

CIMB Niaga president director Tigor M. Siahaan said the bank sees opportunities and will place added focus on the consumer and small medium enterprise segments in a bid to improve performance and boost earnings growth but it is conservative in the environment and has increased loan loss coverage to 120.96% to ensure adequate reserves.

“We continued to grow our assets selectively and are closely monitoring asset quality.

"The sustained top line growth as reflected by the 9.5% year-on-year growth in net interest income, improvement in provision levels coupled with the government’s economic policy packages that aim to boost the economic growth of Indonesia provide a cautiously optimistic view of our business direction going forward,” he added.

Meanwhile, CIMB Niaga’s total gross loans increased 7.2% y-o-y to 178.89 trillion rupiah as at Sept 30, driven largely by growth in corporate loans, consumer loans and micro small and medium enterprise banking.

The loan to deposit ratio was lower at 94.93% at the end of September 2015 compared with 98.51% a year ago.

Net interest margin declined eight basis points y-o-y to 5.19% at the end of September 2015.

CIMB Niaga’s capital adequacy ratio stood at 16.01% as at Sept 30, 2015.

As at 3.16pm, CIMB shares were traded down 0.85% at RM4.65 per share, with 9.72 million shares done. Its market capitalisation stood at RM39.7 billion. CIMB Niaga's share price was also down 0.75% at 665 rupiah apiece, bringing a market cap of 16.71 trillion rupiah.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)