INVESTMENT HIGHLIGHTS

• 9MFY16 net profit came in within expectations at 73.8% and 74.4% of ours and consensus’ full year estimates respectively.

• Strong net profit growth from higher PPOP on the back of lower OPEX.

• CI ratio improved to 49.9% in 9MFY16 reflecting the benefits from cost initiatives.

• NII growth despite interest income falling -1.1%yoy, thanks to lower interest expense.

• Customer deposit grew +4.4%yoy on the back of strong CASA growth.

• Asset quality is a concern as GIL ratio closed higher at 2.25%.

• No change to our forecasts

• Maintain NEUTRAL with unchanged TP of RM5.15, pegging the stock to PB multiple of 0.9x on FY17 RHB Bank’s BVPS.

Within expectations. The Group registered 9MFY16 net profit of RM1.42b which came in within ours and consensus’ expectations. It accounts for 73.8% and 74.4% of respective FY16 full year estimates.

Strong net profit growth. Net profit for 9MFY16 grew +9.1%yoy due to stronger growth in 3QFY16. The 3QFY16 net profit grew +120%yoy and +44.3%qoq to RM505.3m owing to lower OPEX as there was RM308.8m one-off Career Transition Scheme cost in 3QFY15. Hence, we saw strong growth in PPOP which was partly offset by an increase in impairment losses for loans and other assets. The 9MFY16 PPOP came in +36.0%yoy higher to RM2.42b, with CI ratio came in at 49.9%.

Topline supplemented by Islamic Banking and NOII. Total income for 9MFY16 grew +5.0%yoy to RM4.83b on the back of robust growth in Islamic Banking and NOII. Islamic Banking grew +10.7%yoy to RM705.4m while NOII grew +6.0%yoy to RM1.53b. The robust NOII was due to higher insurance underwriting surplus, and trading & investment income. This had moderated the lower forex gain and fee income. NII growth was decent at +3.0%yoy to RM2.59b.

NIM continued to be under pressure. Interest income fell -1.1%yoy to RM5.89b, evident that NIM continued to be under pressure. However, this was compensated by a drop in interest expense of -4.0%yoy to RM3.3b. NIM increased by only 2bps yoy to 2.15%.

Source: MIDF Research - 24 Nov 2016