• We expect 4Q24 core PATAMI to be in line with our estimate
• We expect final DPS of 27sen, bringing full-year 2024 payout to 42sen. This translates to 60% payout ratio, relatively similar to 2023 level
• 4Q24 result schedule to release on 27 Feb. Maintain BUY, unchanged RM7.50 TP

Key takeaways from RHB's meeting

We expect net fund-based income in 4Q24 to hold up, supported by a higher loan base. Despite this, net interest margin (NIM) is expected to see a 4-5bps QoQ contraction, largely attributable to the delayed impact of US Fed Fund rate cuts on US$-denominated loans. Domestic funding cost pressures are expected to remain broadly stable, underpinned by healthy competition in deposit markets. On non-fund-based income, we anticipate RHB will recognize a one-off gain of RM50m from the disposal of its Thailand brokerage business, partly offsetting weaker trading-related income. Operating expenses are expected to be higher QoQ in 4Q24 due to (1) one-off costs related to the disposal of the Thai brokerage business (c.RM15m) and (2) accelerated bonus provisioning. Despite this increase, the cost-to-income ratio remains well within RHB's target of 46% for 2024. The loan loss provisions are expected to decrease as recovery occurs, resulting in an improved GIL ratio and stronger loan loss coverage ratio of 75% (vs. 70.6% in 3Q24). Loan growth will likely increase in 4Q24, driving full-year growth above 6% (from annualized 9M24 of 4.8%). The growth is attributed to increased commercial and corporate loans, as the recovery in MGS yields is likely to narrow the cost differential between new bond issuance and borrowing from banks.

4Q24 to be in line with our expectations

We believe RHB's 4Q24 core PATAMI to be in line with our RM704m estimates (+20% YoY, -16% QoQ), bringing 2024E core net profit to RM3bn (+7% YoY). Headline NIM is expected to close at 1.88% (+6bps YoY), at the higher end of management's guidance of 1.82%-1.88%. We expect RHB to declare a DPS of 27sen in 4Q24, bringing the full-year 2024 DPS to 42sen, implying a 60% payout ratio (2023: 61%).

Maintain BUY; unchanged GGM-derived RM7.50 TP

We maintain our BUY rating and GGM-derived target price of RM7.50. We continue to like RHB for its undemanding valuations (0.86x 2025E P/BV with 10% ROE) and a sector-high dividend yield of 7%. Key risks to our BUY call include extended NIM compression, rising cost base, and asset quality deterioration.

Source: Philip Capital Research - 4 Feb 2025