KUALA LUMPUR: RHB Bank Bhd's net profit fell by 34.9% to RM400.77mil in the second quarter ended June 30, 2020 mainly due to the one-off net modification loss of RM392.4mil.
The banking group said on Friday the net profit compared with RM615.41mil a year ago.
RHB Bank said it was also impacted by higher allowances for credit losses on loans, advances and financing, offset by higher net fund based income and non-fund based income, coupled with lower operating expenses.
“Excluding a one-off modification loss of RM392.4mil, normalised pre-tax profit for the quarter was at RM906.6mil, 20.5% higher as compared to RM752.3mil recorded in the preceding quarter ended March 31, 2020.
It said this was mainly due to higher non-fund based income, partially offset by higher impairment on loans and financing, lower net interest and fund based income, higher impairment loss in an associate and higher operating expenses.
In 2Q, its revenue slipped by 4.2% to RM3.27bil from RM4.21bil. Earnings per share were 9.99 sen compared with 15.35 sen. It did not declare a dividend for the quarter compared with 12.5 sen a year ago.
RHB Bank said group net profit fell by 22% to RM971.7mi from a year ago due to the one-off net modification loss of RM392.4mil in relation to the loan repayment moratorium accorded to our customers and higher allowances for credit losses. The impact came primarily from hire purchase and personal financing portfolios.
“Higher net fund based income and non-fund based income, coupled with lower operating expenses helped mitigate the profit reduction,” it said.
RHB Bank said in March this year, the group granted an automatic repayment moratorium for loans and financing to individual and SME customers, and an option to opt-in for the repayment moratorium to other customers in order to cushion the impact of Covid-19 pandemic.
Net fund based income increased by 3.5% year-on-year to RM2.49bil driven by proactive management of funding costs, which dropped 14.0% year-on-year, supported by an increase in current accounts/ savings accounts (CASA) composition from 26.6% to 28.6% and the redemption of Hybrid Tier-1 Capital and certain sub-debt instruments during the period.
Net interest margins for the quarter dropped to 2.05% compared with 2.09% for the same period last year.
Non-fund based income improved by 9.8% to RM1.21bil, contributed largely by higher net trading and investment income, brokerage income and insurance underwriting surplus.
On the outlook, RHB Bank said the economic impact of Covid-19 pandemic continues to be felt by businesses and individuals alike, globally and domestically.
The gradual and phased re-opening of the various sectors of the economy in a controlled and orderly manner will enable Malaysia to recover at a faster pace. Businesses are now forced to recalibrate and realign their strategies to that of the new normal in order to remain relevant post Covid-19.
Datuk Khairussaleh Ramli, group managing director, RHB Banking Group, said the group was not spared from the effects of the pandemic “but we remain committed to assist our customers, absorbing the net modification loss arising from the implementation of the loan repayment moratorium in the first half of 2020”.
He said against the backdrop of a sharp economic contraction, the group also continues to exercise prudence by building up provisions in anticipation of a potential weakening of asset quality.
“Nevertheless, the group’s healthy liquidity position and strong capital base will help us cushion the adverse impact caused by the pandemic. The group has taken a prudent stance of not declaring any interim dividend but will revisit this at year end when there is better visibility on the impact and outlook,” he said.
Khairussaleh said the group also continues to provide financial support to SMEs through various types of financial assistance.
As at July 31, 2020, he said the group had approved a total of approximately RM1.8bil in financing benefitting about 2,600 SMEs under various programmes including the Special Relief Facility, RHB BizPower Relief Fund, Automation and Digitalisation Facility, and the Agrofood Facility.
“The outlook remains challenging but in the medium term, we remain steadfast in driving our FIT22 five-year strategy, making the necessary adjustments to our key initiatives to meet the changing customer behaviour and respond to the demands brought about by Covid-19.
“We are confident that we will be able to navigate the group through these unprecedented economic challenges,” he said.