Investment Highlights

• We maintain our BUY recommendation on RHB Bank with an unchanged fair value (FV) of RM7.40/share pegging the stock to FY23F P/BV of 1.0x supported by ROE of 11%.

• No changes to our neutral 3-star ESG rating. We tweaked our FY22F/23F/24F earnings by +0.5%/+0.1%/-1.1% after adjusting our net interest margin (NIM) and loan growth assumptions.

• 9MFY22 core earnings were within expectations making up 70% of our full-year estimate while it exceeded consensus numbers, making up 84.5% of street projection.

• The group reported 9MFY22 core earnings of RM2.2bil, a modest increase of 2.7% YoY supported by higher NII from a stronger net interest margin (NIM) and loan volume coupled with lower provisions. Year-to-date (YTD), the group’s NOII was dragged by lower fee income, insurance underwriting surplus, net trading and investment income.

• The group’s loan accelerated to 7.8% YoY supported by mortgages, HP, SME and commercial segments as well as expansion of loans in Singapore and Cambodia. Domestic loans grew by 6.6% YoY, surpassing the industry’s 6.4% YoY growth.

• Operating expenses grew 3.7% YoY in 9MFY22 due to higher personnel, establishment, administration and general expenses. CI ratio was 44.8% in 9MFY22 within the group’s target of ≤ 45% for FY22.

• Provisions for loan losses fell by 42.5% YoY in 9MFY22, attributed to lower ECL on loans and bad debt recoveries. 9MFY22 credit cost of 24bps was within management’s guidance of 30bps for FY22. Management overlays increased by RM26mil to RM840mil in 3QFY22.

• RHB Bank recorded a higher normalised earnings of RM796mil (+8.6% QoQ) in 3QFY22 after excluding the impact of Cukai Makmur. This was contributed by stronger net interest income (NII) and non-interest income (NOII) from an increase in forex gains, derivatives and the positive revaluation on securities partially offset by higher allowances for loan losses.

• 3QFY22 NIM rose by 4bps QoQ to 2.27%, contributed by OPR hikes and expansion in loan base.

• The group GIL ratio decreased to 1.57% in 3QFY22. Stage 2 loans ratio trended lower QoQ to 5.67%.

Source: AmInvest Research - 30 Nov 2022