HLIB Research maintained its 'buy' call and target price of RM6.60 on RHB based on a 2023 financial year price-to-book ratio of 0.88 times.
KUALA LUMPUR: RHB Bank Bhd may see its net interest margins (NIMs) expand slightly despite the anticipated effects of the overnight policy rate (OPR) hikes.
Hong Leong Investment Bank Research (HLIB) noted that RHB’s NIMs may grow by up to four basis points only now instead of up to six basis points as had been guided earlier.
“Gains from the overnight policy rate (OPR) hikes are now broadly neutralised by price competition for fixed deposits, current accounts and savings accounts being run down.
“Further to this will be the expiry of using Malaysia Government Securities to meet the statutory reserve requirement compliance at the year’s end,” HLIB Research said.
RHB Bank is still guided for net interest margins to widen by two to three basis points for every 25-basis-point rise in the OPR.
HLIB Research noted RHB’s non-interest income remained subdued in the recently ended third quarter of the year.
“We spoke to the management recently about some operational updates. In general, their tone was rather guarded,” the research house said.
Meanwhile, RHB has indicated its net credit costs for the year could come in at the lower end of its earlier 30 to 40 basis point guidance, which is still in line with its estimates.
This, HLIB Research said, implies a 45-basis-point annualised net credit cost run rate for the remainder of the year.
“We expect provision top-ups on macroeconomic variable adjustments and further management overlay allowances going forward,” it said.
HLIB Research maintained its “buy” call and target price of RM6.60 on RHB based on a 2023 financial year price-to-book ratio of 0.88 times.
“This is above its five-year mean of 0.81 times but in line with the sector’s 0.88 times. In our view, the valuation multiple is fair, since its return on equity output is comparable to the sector’s average,” HLIB Research said.
“For mid-sized banks, we continue to like the bank for its elevated common equity Tier-1 ratio, which indicates headroom for attractive dividend payouts in the future along with undemanding valuations,” HLIB Research added.
