Investment Highlights

• We maintain BUY on RHB Bank with a higher fair value (FV) of RM6.60/share from RM6.30/share. This is due to a higher BV/share estimate after factoring in the actual FY23 numbers into our model. We continue to peg the stock to FY24F P/BV of 0.9x supported by ROE of 9.5%. No changes to our neutral 3-star ESG rating.

• We raise our FY24F earnings slightly by 2.3% after adjusting our loan growth and NIM assumptions.

• 12M23 earnings of RM2.8bil were within expectations, coming in by a slight 1% above our forecast and consensus’.

• The group’s 12M23 net profit grew 4.8% YoY, supported by stronger non-fund-based income which offset a weaker fund- based income as well as lower provisions.

• On QoQ basis, RHB Bank recorded lower earnings of RM586mil (-9.9%) in 4Q23, contributed by higher operating expenses and provisions.

• 12M23 total income of RM7.7bil slipped by 4.8% YoY as compression in NIM contributed to the decline in net fund- based income despite loan book expanded.

• Loan growth picked up pace slightly to 4.8% YoY in 4Q23 vs. 4.6% YoY in 3Q23, supported by growth in Singapore loans as well as domestic SME and retail loans. Domestic loans grew 3.4% YoY compared to the industry’s 5.7% YoY.

• 4Q23 NIM declined 8bps QoQ to 1.77%. 12M23 NIM fell 42bps YoY to 1.82% due to higher cost of funds. On its liabilities management initiatives, the group has utilised FX swaps for USD to fund ringgit assets. For 12M23, this initiative has resulted in an income of RM321mil under the NOII line. Including income from FX swaps, its NIM in 12M23 would have been higher at 1.93%.

• OPEX In 12M23 has been well controlled with a growth of 2.3% YoY. However, CI ratio climbed to 47.5% in 12M23 (12M22: 44.2%) due to a lower total income.

• 12M23 credit cost was 16bps, slightly higher than 15bps in 12M22. After the substantial write-backs in 2Q23, remaining management overlays stood at RM0.3bil.

• The group’s GIL ratio declined to 1.74% in 4Q23 vs. 1.79% in 3Q23. This was contributed by the improvement in domestic GIL ratio. Meanwhile, on overseas operation, GIL ratio for Singapore and Thailand rose QoQ.

• A 2nd interim dividend of 25 sen/share - 10 sen: cash and 15 sen: electable for dividend reinvestment plan (DRP) - has been proposed. This brings FY23 total dividends to 40 sen/share, representing a payout of 61.1%. The 2nd interim dividend still includes a DRP option as management intends to be prudent on capital position amidst the uncertainties on the impact of new Basel III standards.

Source: AmInvest Research - 28 Feb 2024