CIMB Research keeps RHB Bank as top pick


  • Banking
  • Friday, 26 Apr 2019

KUALA LUMPUR: CIMB Equities Research is retaining RHB Bank as an Add and top pick for the sector due to its attractive valuations and ongoing transformation programme.

It said on Friday RHB Bank was trading at FY20F P/E of 8.3 times and price to book value of 0.8 times.
“The potential downside risks are deterioration in loan growth and asset quality. Our FY19-21F EPS forecasts and dividend discount model based target price of RM6.50 are intact,” it said.

On Thursday RHB Bank hosted a Digital Day to present its digital banking (DB) initiatives. During the event, it also demonstrated various DB applications. 

“We are slightly more positive on RHB Bank following the briefing due to the positive results from its DB initiatives. 

“Holistic approach yielding various applications RHB Bank’s DB strategies are holistic, covering various areas like housing loans, SME loans, treasury, etc,” it said.

CIMB Research said these have helped the bank to develop various applications, such as (1) RHB MyHome App, (2) RHB ISmart sales tool, (3) SME Online Financing, and (4) RHB Insurance App. 

RHB Bank said its DB initiatives have yielded positive results. For instance, its RHB MyHome App has contributed a meaningful 17% of its total mortgage business of more than RM2bil year-to-date.

Furthermore, SME loans applied through its SME Online Financing have totalled more than RM80mil within less than one year of its launch in June 2018.

“By 2022, it aims for DB to account for (1) 80% of its banking transactions, and (2) 50% of its retail/SME businesses.  By then, it also expects 25% of its new business to be generated from analytics. 

“In our view, the development of DB will help RHB Bank (and most banks) to improve operating efficiency and customer experience. However, the impact on earnings would be depleted by the lowering (or even the waiver) of fee for certain online transaction,” said the research house.
 

Banking , Analyst Reports