KUALA LUMPUR: RHB Bank’s Q2 FY19 net profit of RM615mil (+8% YoY, -2% QoQ) which took H1 FY19 net profit to RM1.24bil (+7% YoY) were above expectations at 53% of Maybank Investment Bank Research/consensus’ full-year forecasts.
It said on Tuesday the results were in line at the operating level and the primary variance was the credit cost, which was lower than expected.
Annualised loan growth was 4% but 1H19 net interest margin (NIM) compression was larger than expected by about 12bps to 2.12% in 1H19.
“Nevertheless, management guides for FY19 NIM to stabilise at around current levels on the back of the repricing of deposits and the redemption of more expensive debt.
“We maintain our FY19 NIM forecast of 2.15%, but trim our estimate to 2.11%/2.13% in FY20/21E (from 2.16%/2.18%) on factoring in the possibility of another rate cut by the end of this year/early 2020. As a result, our FY19 forecast is maintained (on expectations of higher credit costs in 2H19) but our FY20/21 net profit forecasts are cut by 4%/2% respectively, ” it said.
RHB Bank announced a higher interim DPS of 12.5sen (40% payout ratio) versus 7.5sen (36% payout) in 1H18.
Maybank IB Research said that RHB Bank’s ability to do so may be attributed to a very strong CET1 ratio of 16.3% end-June 2019, which is the highest among peers.
“Our forecasts continue to assume a 40% payout but with such strong capital positions, higher payouts in the near future are likely, in our opinion.
“We lower our FY20-21 NIM forecasts by 2-4% to factor in a further rate cut. 2Q19 results were nevertheless decent with 4% YoY operating income growth in 1H19, positive JAWS and lower credit costs.
“Our TP of RM6.50 is maintained as we roll forward valuations to FY20 on a PBV of 1x (ROE: 9.5%) vs a FY19 PBV of 1.1x previously, ” it said.