KUALA LUMPUR: Maybank Investment Bank Research believes RHB Bank Bhd is trading at undemanding valuations while maintaining an attractive dividend yield.
"RHB’s FY23E dividend yield of 7.7% is one of the most attractive in the industry.
"Moreover, the stock trades at a FY23E PBV of just 0.8x for a potential ROE of 10.1%, which is undemanding," it said in a note.
Maybank IB has imputed a dividend payout ratio of 62% in FY23-24.
The research firm, which has a "buy" call on RHB with a target price of RM7.10, said its FY23 targets for RHB are more conservative than that of management's, leading to an FY23/24 earnings forecast that is 6% below consensus.
"Key variances include a FY23E net interest margin compression assumption of 7bps vs management’s -2bps target, and FY23E credit cost of 35bps vs management’s 25-30bps.
"Our loan growth target of 4.5% is within management’s range of 4% to 5% but our FY23E cost/income ratio of 45.5% [or less] is higher than management’s 44.6% [or less] target.
"Our FY23E ROE of 10.1% trails management’s 11% [or more] target," it added.
Maybank IB said RHB's loan loss coverage as at end-2022 was 140% including regulatory reserves.
Excluding its pre-emptive provisions of about RM840mil, LLC would till be 114%, it said.
Of its loans under repayment assistance of MYR7.3bil as at end-January 2023 (4% of total loans), 95% is still current, 2% are less than 30 days in arrears, 2% between 30-60 days in arrears and just 1% is delinquent at this stage.