Digitalization And CASA Expansion Will Enable Operational Efficiency

Key Takeaways

• Acceleration of digital banking and fee-based income boosts efficiency, revenue sustainability, and margin resilience amid evolving customer preferences.
  
• Targeted loan growth in consumer and SME sectors, plus disciplined asset management, underpins stable earnings and competitive market expansion.
  
• Intensifying competition, strategic risk-taking, digital transformation costs, and mounting regulatory pressures threaten profitability, market share, and revenue diversification if not effectively managed.

Catalysts

Provides various banking products and services in Indonesia and internationally.

• Digitalization and increased mobile/online banking engagement, demonstrated by 37% YoY growth in mobile financial transactions and 62% of new savings accounts opened digitally, positions CIMB Niaga to reduce cost-to-serve, improve operational efficiency, and expand fee-based income-supporting higher net margins and recurring revenues.
  
• Robust loan growth focus in consumer (especially auto loans and unsecured credit) and SME segments, particularly in underpenetrated secondary cities, taps into rising domestic affluence and a broader middle class, fueling sustainable top-line revenue and gaining market share.
  
• Significant CASA growth (10.9% YoY), particularly from younger and corporate customers, reduces funding costs and supports margin stability, while management sees further opportunity to lower deposit pricing in coming quarters, directly benefiting net interest margi
  
• Strategic capital allocation toward higher risk-adjusted return segments and persistent asset quality discipline (NPL at 1.88%, below industry average) creates a platform for stable earnings, lower provision expenses, and improved returns on equity.
  
• Momentum in recurring non-interest income (NOII at 30.3% of total revenue) through digital channels, product innovation, and partnerships (including subsidiaries and wealth management), aligns the bank with evolving financial preferences and lower-yield environments, supporting overall revenue diversification and margin resilience.

Bank CIMB Niaga Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bank CIMB Niaga's revenue will grow by 11.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 39.8% today to 36.2% in 3 years time.
• Analysts expect earnings to reach IDR 8569.9 billion (and earnings per share of IDR 328.88) by about August 2028, up from IDR 6874.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as IDR7549.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.5x on those 2028 earnings, up from 6.3x today. This future PE is lower than the current PE for the ID Banks industry at 16.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.37%, as per the Simply Wall St company report.

Bank CIMB Niaga Future Earnings Per Share Growth

Risks

• Persistent margin compression from high cost of funds and competitive deposit pricing could continue to pressure net interest margins (NIM), limiting the growth in net interest income and impacting overall profitability if competition for deposits remains elevated or market interest rates stay low.
  
• The strategic pivot toward higher-yield, higher-risk segments such as unsecured consumer loans, SME, and auto loans exposes CIMB Niaga to increased credit risk; any deterioration in the macroeconomic environment or sector-specific downturns may result in rising non-performing loans (NPLs), higher credit costs, and earnings volatility.
  
• The ongoing decline in mortgage loan balances, alongside industry price wars and weakened demand, suggests a structural weakness in the mortgage segment that may limit future retail loan growth and reduce revenue diversification if not addressed.
  
• Rapid digital transformation and investments in technology, while improving efficiency, come with high recurring tech costs and execution risk; failure to keep pace with digital-first competitors-including fintechs and digital-only banks-could erode market share and fee income, impacting top-line growth.
  
• Heightened regulatory requirements, including more stringent capital and liquidity standards or increased focus on ESG, may drive up compliance and operational costs, potentially limiting lending flexibility and squeezing net margins and returns on equity over the long term.

Valuation

• The analysts have a consensus price target of IDR2170.0 for Bank CIMB Niaga based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of IDR2400.0, and the most bearish reporting a price target of just IDR1850.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be IDR23704.8 billion, earnings will come to IDR8569.9 billion, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 14.4%.
• Given the current share price of IDR1730.0, the analyst price target of IDR2170.0 is 20.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.