CIMB Research said it remains positive on RHB Bank's earnings outlook for FY25 to FY27.
PETALING JAYA: CIMB Research is upbeat on RHB Bank
Bhd’s earnings outlook for financial year 2025 (FY25) to FY27 and on the group’s ability to sustain long-term returns amid near-term headwinds.
Following its recent meeting with the bank, the research house said it remains positive on its earnings outlook for FY25 to FY27.
The research house added that RHB’s long-term growth trajectory is steadily improving, supporting sustainable returns towards achieving its more than or equal to 12% return on equity (ROE) target by 2027 under PROGRESS27.
PROGRESS27 is the group’s three-year corporate strategy.
RHB remains committed to its FY25 ROE goal of 10.4% to 10.8%.
“However, we adopt a more measured view, maintaining our FY25 forecast ROE forecast of 9.5% to reflect near-term headwinds like rate cuts (in Malaysia and Singapore) are expected to weigh on FY25 net interest margin and fund-based income before normalising in FY26.
“Also, FY25 loan growth could fall short of the 5% to 6% target owing to RHB’s deliberate reduction in overseas loan exposure due to an ongoing asset-derisking exercise,” the research house noted.
On a more positive note, it said RHB’s FY25 earnings would continue to benefit from a few factors.
These include the tactical realisation of fair value gains from treasury assets, redeployment of liquid assets into higher-yielding loans, stronger fee income from wealth and bancassurance, coupled with tight cost control and rationalisation measures (with cost take-out measures), and ongoing credit recovery efforts, including a key repayment from a major oil and gas (O&G) player, asset liquidation proceeds, and active overseas asset recovery efforts.
“We expect the planned repayment by a key Malaysian O&G borrower to its preferred unsecured creditors to strengthen RHB’s credit recoveries in the fourth quarter of FY25.
“Consequently, we have turned more confident and lowered our FY25 net credit charge assumption to 20 basis points (bps) from 25 bps, resulting in RM120mil lower provisions.
“In tandem, we have raised our FY25 net profit forecast by 3%, which in turn lifts our FY25 ROE from 9.2% to 9.5%.
“The FY25 dividend per share has also been raised to 44 sen from 43 sen (payout ratio: 60%).
“All other key FY25 assumptions remain unchanged, as they are broadly in line with RHB’s expectations,” the research house added.
While RHB’s resilience and earnings visibility remain intact, near-term headwinds may still limit ROE delivery.
The research house is maintaining its “buy” rating on the stock with a target price of RM7.35 per share.
