(RHBBANK MK/SELL/RM5.29/Target: RM4.65)

RHBBank’s 1Q17 results were marginally above our estimates due to lower-than expected credit cost. However, pre-provision operating profit was weak contracting 5% yoy. The group has the lowest LLC ratio (inclusive of regulatory reserves of 78%) among peers vs the industry’s 129%, and is also significantly higher than industry GIL ratio of 2.39% (industry: 1.63%). This will place pressure on capital and provisions post implementation of MFRS9 in 2018, which the market will have to start pricing in. Maintain SELL with slightly higher TP of RM4.65 (8.3% ROE, 0.80x P/B).

Source: UOB Kay Hian Research - 24 May 2017