PETALING JAYA: RHB Bank Bhd is likely to be operating with modest loan prospects in the financial year 2024 (FY24), with stable net interest margins (NIM) as well as a balanced set of non-fund-based streams, says Kenanga Research.
“RHB Bank looks to maintain its 4.5% loan growth target (lower from FY23’s 4.8% achievement).
“For now, the group plans to stay its ground in mortgage markets where it sees encouraging growth.
“We note that RHB Bank has not factored in upcoming infrastructure projects as part of its projections, opening the possibility for better-than-expected delivery should they be rolled out accordingly,” the research house said in a report.
In lieu of its mortgage efforts, Kenanga Research said RHB Bank could participate competitively but opines that it will be selective with its pricing.
On the flipside, the easing of funding costs is seeping in with fixed-deposit rates in the recent months appearing to fall below FY23’s mark.
“This supports the NIM guidance of 1.8% to 1.9% (FY23: 1.82%),” it said.
On non-interest income (NOII), Kenanga Research noted that RHB Bank’s FY23 NOII was led by strong returns from its liability management initiatives, which comprises foreign exchange (forex) swaps.
“The group believes that interest rate movements may pose more risks to its returns than forex rates.
“Given that there are expectations of rate cuts in the second half of 2024, we believe its contributions during the year could decline.
“On the other hand, stockbroking and fee-based sources are likely to benefit from a more vibrant stock market to support overall performance,” it added.
Meanwhile, RHB Bank’s digital banking arm Boost Bank is poised to be launched in the coming months with introductory deposit products.
“Lending products are due to be integrated progressively following further reviews by Bank Negara, as with its digital banking peers.
“We note that Boost Bank has largely contributed to the RM26mil associate losses to RHB Bank for its 40% stake (or about RM65mil in entirety), as it has yet to generate revenue. “
Assuming this prevails as a run rate, it translates to significantly higher cost efficiency against a comparable peer, said the research firm.
Kenanga Research has maintained its “outperform” call on RHB Bank with an unchanged target price of RM7.25 per share.
