PETALING JAYA: RHB Bank
Bhd’s Progress27 strategy has received mixed response from analysts, with research houses adopting varying stances on the group’s targets and growth plans.
While some analysts welcomed the roadmap, others remained cautious about the bank’s ability to deliver on its financial aspirations amid a competitive domestic landscape.
TA Research noted that RHB Bank’s strategy remains largely domestic-centric, with retail loans, including auto financing and mortgages, remaining key pillars.
“Small and medium enterprise or SME lending and mid-sized corporates are expected to provide additional momentum for loan growth (more than 7% per annum) and current-account-savings-account (Casa) expansion,” it said.
The research house expects RHB Bank’s focus on these high-margin segments and its efforts to enhance the Casa mix to help sustain net interest margin of above 1.9%.
However, TA Research cautioned that RHB Bank’s shift towards higher-risk, non-retail portfolios could pose asset quality concerns.
“Management is confident in maintaining a credit charge ratio of less than 15 basis points (bps) per annum by leveraging artificial intelligence-driven risk management and recovery capabilities,” it said.
TA Research maintained its “buy” rating on RHB Bank, with a target price of RM7.42. It projected a more conservative return on equity (RoE) of 10.4% for RHB Bank by 2027.
“We anticipate the cost-to-income ratio to remain slightly more elevated at 45% to 46% over the next three years,” it added, citing geopolitical risks and domestic competition.
RHB Bank hosted an analyst briefing last Friday to update investors on the new three-year strategy.
Under the initiative, RHB Bank had identified programmes to drive its businesse namely to promote domestic Casa growth, retail wealth management focus, optimise costs and productivity and grow domestic loans portfolio.
It would also remodel wholesale client relationships, expand international business synergies and sustainability through the environmental, social and governance strategies as well as scale technology.
Key performance indicators for 2027 are: more than 12% in RoE, less than 44.8% for cost-to-income ratio, and less than 1.3% for gross impaired loans (GILs) ratio.
Meanwhile, CIMB Research took a more optimistic view, raising its target price to RM8.20 from RM7.50 on the back of an upgraded RoE forecast of 10.3%.
“To sum up, while certain targets look stretched, we like the strategy given that it provided solid granular details on the process the company will be embarking on to achieve its targets,” it said.
It identified key areas of “easy wins” for 2025, including upgraded loan growth forecasts of 5.3% (from 4.3%), a one percentage point increase in Casa deposit growth, and a conservative RM50mil cost take-out.
CIMB Research also lowered its credit cost assumption to 20 bps from 26 bps previously.
“All in, our net earnings are raised by 4.3% for 2025, 5.2% for 2026 and 11.4% for 2027,” it added.
Hong Leong Investment Bank (HLIB) Research was more circumspect, maintaining its “buy” rating with a target price of RM7.80.
“In our view, the strategies put forward by management are not entirely unique and thus, execution is key, especially when the focus areas are largely similar to rivals,” it said.
While HLIB Research was “a tad disappointed” by the absence of significant capital management initiatives, it remained positive on RHB Bank’s risk-reward profile.
“The stock provides appealing dividend yield of around 6% and it is a relatively inexpensive FBM KLCI index banking component,” the research house added.
Kenanga Research also took a cautious stance, citing conservative expectations for RHB Bank’s RoE despite the group’s 12% aspiration.
“Recall that in the earlier ‘Together We Progress 24’, the group had targeted to achieve an 11.5% RoE of which only 10% was delivered,” it pointed out.
Kenanga Research maintained its “outperform” rating on RHB Bank, with a target price of RM7.80 but stressed that the bank could face pressure to “defend its share via lowering asset yields before it could more effectively cross-sell its value propositions”.
The research house also said RHB Bank’s credit cost target of less than 20 bps could facilitate “a gradual step down in GILs” if maintained.
The research house further highlighted RHB Bank’s dividend strength, stating that it seemed on board with a 60% payout which puts its dividend yield proposition (6% to 7%) to be one of the highest among its peers.
Its hefty common equity tier-1 (CET-1) portfolio of around 16% will provide a good safety net should earnings disappoint.
It noted that RHB Bank did not provide guidance for an optimal CET-1 ratio.
