PETALING JAYA: RHB Bank Bhd’s net profit of RM1.95bil for the financial year ended Dec 31, 2017, is within most analysts’ expectations.
MIDF Research noted that RHB posted a solid net profit growth due to lower provisions and lower credit cost, which dipped by 12 basis points to 27 basis points.
It said the bank’s net interest income was only decent at 2% year-on-year (y-o-y) growth, while net interest margin was flat at 2.18%.
However, the research house believes that the strong growth in current and savings accounts (CASA), mortgages as well as small and medium enterprise (SME) loans, provides a good base for RHB’s earnings potential.
Meanwhile, CIMB Research regards RHB Bank as one of the biggest beneficiaries of the rate hike, together with Alliance Bank.
“This is mainly because we estimate RHB will have the second-highest floating-rate loan ratio of about 81% in 2019, only behind Alliance’s Bank’s 90%.
“RHB Bank also increased its fixed deposit (FD) rates by 20 basis points across the board, lower than our expected 22 basis points and the increases of 23 to 25 basis points for most other banks.
“This signifies that the upward repricing gap between RHB Bank’s lending and FD rates could be wider compared to most other banks in the wake of the recent rate hike, further expanding the positive impact,” said CIMB Research in a report yesterday.
CIMB Research added that RHB Bank has attractive valuations, currently at 2019 price-earnings multiple (P/E) of 8.3 times and a price-to-book ratio of 0.8 times.
RHB’s loan growth picked up from 3.3% y-o-y at end-September to 3.7% y-o-y at end-December, below the industry’s 4.1%.
The improvement mainly came from the residential mortgages segment, with an acceleration in the momentum from 12.4% y-o-y at end-September to 13.2% y-o-y at end-December, above the 8.9% rate for the industry.
According to Kenanga Research, RHB has guided for a stable net interest margin as competitive pricing is still prevalent with low mortgages margins and to be compensated by higher personal financing.
“We are encouraged with the traction in its CASA, coming from non-retail, and with the added focus mid-corporate segment should translate into lower funding costs.”
As for the bank’s FY19 earnings, Kenanga Research expects earnings to improve by 8% on account of better loans, improved net interest margins and stable credit costs.