RHB Bank extends decline but CIMB Research sees earnings recovery

CIMB Research has target price of RM6.20 for RHB Bank

KUALA LUMPUR: RHB Bank's share price continued to lose ground on Monday, extending its decline from late last week on concerns about the provisions and impairments, to reach its lowest since mid-January this year.

At 11.33am, it was down seven sen to RM4.86. There were 618,800 shares done at prices ranging from RM4.85 to RM4.88.

Its recent high was RM5.25 on Feb 13 and these concerns also spurred profit taking.

The FBM KLCI was up 3.55 points or 0.21% to 1,701.90. Turnover was 1.53 billion shares valued at RM611.90mil. The broader market was weaker with decliners beating advancers 432 to 291 and 337 counters unchanged.

CIMB Equities Research has retained its Add recommendation for RHB Bank and reduced its dividend discount model (DDM based target price from RM6.10 to RM5.96.

Despite the disappointing 4Q16 results, it retained its Add call on RHB Bank given the expected recovery in earnings per share (EPS) growth in FY17F, arising from normalising loan loss provisions (LLP). 

AmInvestment Research is maintaining its Buy rating on RHB Bank with a higher fair value of RM6 a share (previously: RM5.90 a share) after rolling forward over its valuation to FY18. 

Its fair value is based on FY18F returns on equity (ROE) of 9.1% leading to unchanged price-to-book value of (P/BV) of one time.

AmInvestment Research pointed out RHB Bank’s 4QFY16 net profit was lower at RM261mil (-48.3% on-quarter), largely due to lower non-interest income (NOII) from a decline in investment/trading income, lower forex profit and fee income.