KUALA LUMPUR (Feb 27): RHB Bank Bhd, which reported a return on equity (ROE) of 9.7% for the financial year ended Dec 31, 2022 (FY2022), is confident of achieving its target of an 11.5% ROE by FY2024, on the back of higher gross fund-based income.

Group managing director and chief executive officer Mohd Rashid Mohamad said better and more efficient cost management would also contribute towards the group delivering on its target, which the bank set in its Together We Progress 2024 (TWP24) strategy introduced last year.

“Our gross fund-based income has increased over the years, and managing cost also contributed to a better ROE for 2022," he said at a media briefing on Monday (Feb 27) on RHB’s FY2022 results.

For the year, the group reported an 8.6% improvement in net fund-based income to RM6.37 billion, driven by higher gross fund-based income, which grew 18.3% year-on-year, supported by a loan growth of 6.9%.

The net interest margin stood at 2.24% for the year, compared with 2.20% in FY2021.

Mohd Rashid said the bank will continue to make the necessary investments in modernising its technology infrastructure and smart automation to better serve customers, as well as increase value and productivity in the long term.

“In the last couple of years, RHB has been focused on IT modernisation and smart automation. These are the two areas we are focusing on. That has impacted our cost-to-income ratio (CIR).

“Spending on IT and technology was a slightly higher cost for us in 2022. And of course, this is over the period of many years. We also saw depreciation coming into last year and this year,” he added.

RHB’s operating expenses increased 5.5% to RM3.71 billion in FY2022, mainly due to higher personnel and establishment costs.

With positive jaws, the CIR improved to 44.7%, compared with 45.2% a year earlier.

The bank spent RM281.39 million on IT expenses, compared with RM280.19 million in FY2021.

Mohd Rashid also said RHB is looking into further reducing its CIR level this year, from 44.7% achieved in FY2022. The group's long-term CIR target is 44.5% by FY2024.

“We are confident about what we have done in the last couple of years for us to become more efficient in terms of delivering and operating. Cost management will continue to be in focus in 2023, but we have spent quite a lot on IT in terms of modernisation,” he added.

For FY2023, RHB expects to grow its net fund-based income at a measured pace, as funding costs continue to be impacted by deposit competition.

“Non-fund-based income is projected to recover, though challenging market conditions remain. We seek opportunities to build securities portfolios and focus on wealth management fee income, especially in Islamic wealth management,” said Mohd Rashid.

RHB recorded a 22% increase in net profit to RM772.11 million for the fourth quarter ended Dec 31, 2022, from RM631.16 million a year earlier, due to the absence of modification loss, as well as significantly lower allowances for credit losses on financial assets. Revenue for the quarter grew 36% to RM3.95 billion, from RM2.89 billion previously.

For the full year, RHB posted a net profit of RM2.71 billion, up 3.4% from RM2.62 billion for FY2021, with revenue growing 13% to RM13.27 billion from RM11.75 billion.