Investment Highlights

• We maintain our BUY recommendation on RHB Bank with a revised fair value of RM6.80/share (previously: RM6.90/share). We peg the stock to FY22 P/BV of 0.9x supported by a lower ROE of 10.0%. We fine-tune our FY21/22/23 earnings by -1.8%/-2.2%/-2.4% after lowering our non-interest income (NOII) estimates.

• RHB Bank recorded higher core earnings of RM701mil (+7.4%QoQ) for 2Q21 underpinned by higher total income, lower operating expenses (opex) partially offset by higher provisions.

• 6M21 underlying net profit came in at RM1.35bil (+5.5% YoY) supported by stronger net interest income (NII) partially offset by lower non-interest income (NOII), higher opex and provisions. Cumulative earnings were within expectations, making up 51.9% and 54.5% of our and consensus estimate respectively.

• The group’s loan growth decelerated to 5.7% YoY in 2Q21 (1Q21: 6.8% YoY).

• Loan expansion was supported by mortgages, auto finance, SME loans and growth of overseas loans (mainly Singapore). Corporate loan growth remained muted due to repayments.

• Domestic loans grew 4.1% YoY ahead of the industry’s +3.4% YoY.

• NIM declined marginally by 2bps QoQ to 2.15% in 2Q21.

• Based on underlying total income (excluding mod loss), JAW was positive of 0.5% YoY for 6M21.

• 2Q21 credit cost was higher at 0.46% with additional provisions (management overlays) of RM161mil booked. 6M21 credit cost of 0.42% was slightly above management’s guidance of 0.40% for FY21.

• The group’s GIL ratio improved slightly to 1.63% in 2Q21.

• An interim dividend of 15 sen/share has been declared, representing a payout of 45.1%, higher than FY20’s p10 sen/share. The dividend comprises 5.0 sen cash and 10 sen electable under the DRP.

Source: AmInvest Research - 30 Aug 2021