Investment Highlights

• We maintain our BUY recommendation on RHB Bank with a revised fair value of RM7.10/share from RM6.90/share. We peg the stock to FY22 P/BV of 1.0x, supported by ROE of 10.7%. We fine-tune our FY22/23 earnings by +1.5%/-1.0% after adjusting estimates for credit cost and NIM assumptions.

• RHB Bank recorded lower normalised earnings of RM658mil (-14.1% QoQ) after stripping out mod loss net of tax of RM27mil in 4Q21. The drop in earnings was attributed to lower non-interest income with stockbroking, asset management gains from disposal and revaluation of securities declining QoQ.

• 12M21 underlying net profit came in at RM2.8bil (+21.1% YoY), supported by stronger net interest income (NII) and lower provisions partially offset by lower noninterest income (NOII) as well as higher opex. Cumulative earnings were within expectations, making up 103.1% of our estimate while exceeding consensus estimates at 107.2% of street projection.

• The group’s loan grew by 6.7% YoY, supported by mortgages, HP, SME, commercial loans and growth of Singapore’s loans. Domestic loans expanded 4.8% YoY vs. the industry’s 4.5% YoY.

• Normalised NIM, excluding the impact of mod loss, increased by 8bps YoY to 2.14% in 12M21 due to lower funding cost.

• Based on underlying total income (excluding mod loss), JAW was positive of 9.7% YoY for 12M21.

• 12M21 credit cost of 0.29% was below management’s guidance of 0.40–0.45% for FY21 aided by recoveries and lower ECL on loans.

• Group GIL ratio rose to 1.49% in 4Q21 from 1.32% in 3Q21 due to corporate loan impairment. Except for corporate loans’ GIL ratio, the asset quality ratio for other loan segments improved QoQ. Stage 2 loans for key segments were lower in 12M21 compared to 12M20.

• A final dividend of 25 sen/share has been proposed bringing the total dividends to 40 sen/share, a record payout of 62.9%. This exceeded our estimate of 27.1 sen/share.

Source: AmInvest Research - 1 Mar 2022