RHB Bank posts higher FY16 earnings of RM1.68b

RHB Bank's share price came under pressure on Thursday over worries about provisions for impairments

KUALA LUMPUR: RHB Bank Bhd posted a set of improved earnings at RM1.68bil in the financial year ended Dec 31, 2016 on higher operating profit before allowances due to lower funding costs and also due to healthy growth in current accounts and saving acccounts (CASA).

It said on Friday the earnings were up 1.6% from the RM1.66bil in FY15. Revenue however dipped to RM10.57bil from RM10.77bil a year ago.

For the fourth quarter, its earnings were lower at RM261.2mil, a decline of 28.1% from the RM363.37mil a year ago due to lower othewr operating income and allowances for impairments.

The Q4 FY16 revenue fell 9.2% to RM2.557bil from RM2.818bil. Interest income was RM1.94bil compared with RM2.05bil a year ago.

Operating profit before allowance was RM675.71mil compared with RM766.30mil. There was an allowance for impairment on loans, financing and other losses of RM308.73mil – up 29.9% from RM237.56mil a year ago. There were also impairment losses of RM22.89mil compared with RM10.72mil a year ago.

Earnings per share were 6.5 sen compared with 5.3 sen. It announced a dividend of seven sen a share compared with 16.33 sen a year ago.

FY16 financial results

Commenting on the FY16 financial results, RHB Bank said operating profit before allowances grew 21.6% to RM3.094bil due to reduced funding cost following the rights issue that was completed in April 2016, healthy growth in CASA, as well as the reduction in personnel cost arising from the career transition scheme (CTS). Excluding CTS, operating profit before allowances grew 8.4%.

“Included in the 2016 results was an impairment on a corporate bond in Singapore of RM253.5mil in the second quarter of 2016. 

“Comparatively, in 2015, the group incurred CTS expenses of RM308.8mil and benefited from collective allowances written back due to model refinement on mortgage portfolio amounting to RM131.4mil. Excluding the effects of these items, normalised net profit increased by 4.2% year-on-year,” it said.

RHB Bank said its total income in FY16 increased to RM6.193bil, supported by net fund-based income growth of 3.1% to RM4.321bil, on the back of a 2.0% growth in loans and financing, offset by a decline in non-fund based income by 5.6%,” it said.

Islamic banking continued its growth momentum, contributing 24.8% of total domestic gross loans and financing from 23.0% in December 2015.

Non-fund based income was down by 5.6% at RM1.872bil, contributed largely by lower investment banking and securities market related fee income in line with volatility in capital and financial markets as well as lower net foreign exchange gain.

RHB Bank said that allowances for impairment on loans and financing increased to RM595.2mil from RM343.5mil a year ago.

This was primarily due to higher individual allowances for loan impairment on certain corporate accounts relating to oil and gas, and pre-emptive provisions for legacy steel related exposure, coupled with the absence of a one-off collective allowance written back due to model refinement on mortgage portfolio in 2015. 

Gross impaired loans ratio was higher at 2.43% from 1.88% as at Dec 31,  2015.

Total impairment losses on other assets were higher at RM268.2mil mainly due to the full impairment made for a corporate bond in Singapore.