Investment Highlights

• We maintain HOLD on RHB Bank with a higher fair value (FV) of RM6.40/share from RM6.00/share, pegging the stock to FY25F P/BV of 0.8x based on a slightly higher FY25F ROE of 9.5%. No changes to our neutral 3-star ESG rating.

• We revised our FY24/25/26F earnings by 0.6%/2.2%/3.5% to factor in a marginal increase in NIM and higher non-fund- based income estimate.

• 6M24 earnings of RM1.45bil were within expectations, making up 51.2% of our and 50.6% of consensus estimate.

• 2Q24 earnings was flattish at RM722mil (-1.1% QoQ) with a moderate total income (+1.1% QoQ) and lower provisions offset by higher OPEX. Also, the effective tax rate was higher in 2Q24 compared to the preceding quarter.

• 6M24 profit declined by 7.5% YoY, attributed to higher OPEX and allowances for loan losses from the absence of a writeback in management overlays of RM284mil in 6M23. This offset an increase in total income from a higher fund and non-fund-based income.

• Non-fund-based income grew 28.5% YoY to RM1.37bil in 6M24, underpinned by increases in fees (IB, brokerage, asset management, commercial banking), fx gains, trading and investment income coupled with gains from the sale of RHB Securities Vietnam of RM33.6mil.

• Loan growth picked up pace to 6.4% YoY in 2Q24 vs. 5.4% YoY in 1Q24, supported by growth in mortgages, auto loans, commercial loans and financing in Singapore. Domestic loans expanded by 4.9% YoY, below the industry’s 6.4% YoY. Overseas loans grew 15.6% YoY, led by Singapore. Management alluded to a stronger loan growth in 2H24 of 6.5%-7%YoY, supported by mortgages, auto, corporate financing and loans in Singapore.

• 2Q24 NIM improved to 1.89% vs. 1.83% in 1Q24, contributed by liabilities management initiatives. For 6M24, NIM stood at 1.86%, a marginal improvement from 1.82% as of end- FY23. Management guided that the group’s NIM is likely to end FY24F at 1.88%-1.9%, suggesting a small room for improvement. CASA ratio slipped to 28.1% in 2Q24 vs. 29% in 1Q24 due a drop in corporate deposits. The group continued to utilise FX swaps to manage its liabilities. This initiative has resulted in an income of RM160mil under the non-fund-based income line in 6M24. Including income from FX swaps, its NIM in 6M24 would have been higher at 1.97%. The income from FX swaps is expected to taper down in 2H24.

• OPEX In 6M24 rose by 8.1% YoY, driven by higher personnel, IT and marketing expenses. Nevertheless, with a higher total income, CI ratio was slightly lower at 46.3% in 6M24 (6M23: 47.5%).

• Reported credit cost of 32bps in 6M24 (6M23: -4bps) was higher than management’s guidance of 20-25bps for FY24F.

• The group’s overall GIL ratio was slightly lower at 1.76% in 2Q24 vs. 1.83% in 1Q24. GIL ratios in Thailand and Cambodia remain elevated albeit a marginal improvement QoQ.

• The group declared an interim dividend of 15 sen/share in 6M24 similar to 6M23. However, payout ratio was higher at 45% in 6M24 vs. 40.9% in 6M23.

Source: AmInvest Research - 28 Aug 2024