PETALING JAYA: RHB Banking Group, which saw an 18% drop in its net profit for the financial year (FY) ended 2020, is beefing up its digital capabilities to remain resilient in the face of the Covid-19 pandemic and external headwinds.
“Our digital strategy is geared towards addressing the customer journey, delivering a great experience, and moving our digital channels from a transactional focus to engagement as well as acquisition.
“This will also involve accelerating the development of digital payment platform solutions, as well as the digital enablement in our regional offices, particularly in Singapore and Cambodia, ” said group managing director Datuk Khairussaleh Ramli.
He added that the emphasis would be to invest in building capabilities for the medium term through accelerating the digital initiatives.
As part of FIT22 strategic initiatives, RHB has invested RM200mil in implementing and enhancing its digital capabilities from 2017 to 2022. To date, about 60% of the investment has been spent for this purpose. FIT22 was launched in 2017.
Khairussaleh said there has been significant growth in digital transactions across all of the group’s channels since the start of the pandemic in March 2020.
He noted that about 85.6% of transactions were done digitally, up from 64% in 2015.
The group, he said, would continue to modernise and upgrade its IT infrastructure focusing on maintaining essential functions, delivering efficient services to customers, and improving system reliability and turnaround time.
He said 679,000 customers have been transitioned to the new RHB Mobile Banking application since it was launched in April 2019.
Khairussaleh added that the group has also enhanced the RHB SME Ecosystem to promote the transition of small and medium enterprises into the digital economy, and seen a growth of more than 90% in total e-solutions customers in 2020 compared with the previous year.
For its fourth quarter ended Dec 31,2020 (Q4), the group’s holding company RHB Bank posted a 29.4% year-on-year (y-o-y) drop in net profit to RM438.6mil, mainly due to higher expected credit losses (ECL). Revenue was 10% lower to RM3.08bil.
For the full financial year (FY20), the group posted an 18% y-o-y drop in net profit to RM2.03bil, mainly due to net modification loss arising from the loan moratorium and higher ECL.
For this year, RHB Bank expected to rake in better financial results despite the ownside risks to economic recovery.
The group’s return on equity (ROE) target is 9.0% this year compared with 7.7% achieved in 2020.
“In addressing the challenges that have arisen due to the prolonged pandemic, the group had in 2020 revisited its business plan and reprioritised its FIT22 strategic initiatives.
“This allowed the group to adapt quickly to the changing business environment and shifts in customer behaviour. It has enabled us to strengthen our business growth while at the same time help our customers, particularly the businesses, to remain afloat during these challenging times, ” he said in an email interview with StarBiz.
Loans are expected to grow between 4% and 5% this year driven by retail and SME loans in Malaysia and Singapore.
He added that with interest rate expected to remain low, the group would grow its non-interest income, particularly looking at opportunities to monetise its fixed income portfolio, boosting its wealth and asset management business and taking advantage from sustained share trading activity.
The group saw an increase in its gross impaired loans (GIL) ratio in Q4 2020 due to the impact of the pandemic and the challenging economic environment.
At the group level, GIL ratio as at Q4,2020 stood at 1.71%. GIL ratio for its domestic operations was at 1.35% as opposed to the local industry’s GIL ratio of 1.57%.
To improve asset quality, he said the group would maintain prudence, as demonstrated by its preparedness to build conservatism in provisions for potential Covid-19 impact.
“We will continue to focus on maintaining credit discipline and intensify efforts in recovery and collection as well as maintain regular engagement with our customers and offer rescheduling and restructuring of loans and financing facilities tailored to their specific requirements, ” he said.
RHB Bank has proposed a final dividend of 7.65 sen per share in Q4 2020. Together with an interim dividend of 10 sen paid on Feb 9,2021, total dividend for FY20 would be 17.65 sen per share or a 34.8% payout.
Commenting on the dividend payout, Maybank IB Research said: “while the lower dividend payout ratio of 35% (versus our 40% estimate) was a disappointment, its strong capital position does allow for higher future payouts.”
The research house has maintained a “buy” call with a marginally lower target price of RM6.30.
Maybank IB has trimmed FY21/22 net profit forecasts by 3%/1% with higher credit cost assumptions mitigated by higher NIM estimates. “The lower dividends were a disappointment but management explains that it would like to evaluate the impact of the dividend reinvestment plan on dividend take-up patterns first.
“Nevertheless, given its strong capital ratios, we maintain a payout ratio of 40% moving forward, which is lower than the payout ratio of 50% in FY19, ” it said.