Its digital banking license pursuit with Boost would enable penetration into the underserved communities, pending BNM’s decision in 1QFY22. BUY with a TP of RM6.15 based on a PBV of 0.82x (closely within 5-year mean). While management has an aspired dividend payout ratio of 50%, we keep our expectations conservative at 35% which nevertheless still able to garner yields close to 5%. As such, investors could possibly benefit from dividend surprises.

At present, the group’s loan growth guidance of 4-5% still appears to be intact. This is fuelled by demand for housing loans and auto financing, although likely to be set back by softer SME numbers as current economic conditions are not business friendly. Further applications cum economic reopening should help boost year-end performances when our national vaccination rate grows. Regionally, Singapore is poised to perform more favourably than Malaysia on more successful containment of Covid-19 while other regions (Cambodia, Thailand) are seen to be moderate.

Management previously guided a credit cost range of 30-40 bps. With recent developments and recognition needs triggered by the moratorium, it is likely that we could see further overlays to be imputed (currently at >RM600m) in the coming quarters and lead the bank to the tail-end of the range. On the flipside, this could indicate high utilisation levels in the coming years should lockdown measures ease coupled with the reopening of the economy.

In anticipation from impacts of repricing its products, management has kept its NIM guidance of 2.06% (ex-mod loss) for now. However, if economic activity remains soft and CASA levels rise, this could translate to better rates for the group.

Recall that in Jun 2021, RHBBANK and Boost (Axiata Group) jointly applied for a digital banking license. The group’s participation in this space is to provide access to the underserved communities as to financially enable these markets with non-traditional products (i.e. micro loans) which could aid economic development. Further, RHBBANK could stand to leverage on a wider potential customer base in Axiata’s ecosystem, being Celcom customers (and Digi when the merger is completed) for cross selling opportunities.

Source: Rakuten Research - 16 Jul 2021