KUALA LUMPUR (Aug 27): RHB Bank Bhd (KL:RHBBANK) said on Tuesday that it is confident of achieving return on equity (ROE) of more than 10% for its full financial year ending Dec 31, 2024 (FY2024), from its current ROE of 9.4%, given the improving operating landscape and economic conditions in the key markets that the bank is serving.

In a virtual press conference, RHB group managing director cum chief executive officer Mohd Rashid Mohamad said the bank is also confident it would be able to exceed its internal loan growth target of 6.5%-7% for the coming quarters in 2024.

The bank is also expecting its net interest margin (NIM) to be stronger than the current 1.89% for the second half of the year, helped by less intense competition among banks for funds and the bank’s effective use of foreign currency swaps.

For the second quarter ended June 30, 2024 (2QFY2024), RHB achieved a loan growth of 6.4% year-on-year (y-o-y), led by its domestic retail segment which grew 7.2% y-o-y, where mortgage grew 9% y-o-y and auto financing grew 10.7% y-o-y.

The bank’s Singapore loans grew 21.9% y-o-y. Rashid shared that unlike other overseas operations like Thailand and Cambodia, which have faced credit loss problems in recent times, he was comforted by Singapore’s loan qualities where 85% are secured.

The main industries that its Singapore loans are exposed to are property, healthcare and commercial space.

Overall, domestic retail makes up 51% of RHB’s total loan, while domestic wholesale banking contribute 21% and small and medium enterprise (SME) 12%. The bank’s Singapore operation contributes about 13% of its total loan.

To capture opportunities that arise from foreign direct investments into Malaysia, Rashid said the bank’s strategic focus on Johor would supplement its Singapore ops to do so.

In terms of outlook for expected credit losses (ECL), Rashid said ECL is expected to trend downwards in the coming quarters as recoveries are promising as economic conditions turn better in the affected geographical markets. He even noted that positive writebacks could happen in the second half of the year, should better-than-anticipated recoveries happen.

Aside from fund-based income, Rashid is expecting better fee income for the bank as he is seeing an increasing number of investment bank and corporate advisory activities tied to fund-raising and merger and acquisition activities.

He also thinks the bank’s treasury income will improve amid imminent global interest rate cuts in the coming months that could benefit the bank’s fixed income portfolio.

Meanwhile, the bank is set to launch its new corporate strategy in first quarter of 2025, as its 'Together We Progress 2024' corporate strategy is set to expire by the end of 2024,

RHB Bank slipped one sen or 0.2% to close at RM5.92 on Tuesday, giving the bank a market capitalisation of RM25.81 billion. Year-to-date, the stock is up 13.6%, with an indicative dividend yield of 6.76%.