Maybank IB Research has lowered the RHB Bank ‘s earnings for the financial year 2020 (FY20) by 2.0 per cent and retained FY21/22 estimates.

The research house said in a report today that RHB ‘s core net income for the first quarter of 2020 (1Q20) contracted nine per cent year-on-year (YoY), 7.0 per cent quarter-on – quarter (QoQ) to MYR571 million, in line with forecasts at 26 per cent of the full-year forecast. Positively, the net interest margin ( NIM) was fairly constant, with just three basis point (bps) of QoQ falling, as were the fixed costs.

The Net Order Deficit Measure (NOII) declined 16 per cent YoY on the flip hand. Impaired loans decreased slightly due to a lumpy default in the room for corporate property growth, although credit costs increased (partly due to a pre-emptive payment of RM50 million (one-third of the credit cost of the quarter),

Maybank IB said it increased the credit rate estimate to 30bps for FY20 from 27bps but holds 32bps for FY21.

The Group ‘s strengths include its high capital levels and 108 per cent good loan default performance, plus regulatory funds, the latter of which management may not see the need to rely on. Meanwhile, AmInvestment Bank said it fined the 20/21 earnings by +0.4 per cent/-0.8 to represent a slower 2.0 per cent or 3.0 per cent loan growth and a slowdown in RHB Bank deposit development.

In a notice, it said the RM571 million 1Q20 results, underpinned by stable overall profit (+0.2% YoY) and higher provisioning for loan defaults, which included a preemptive RM50 million provision for the future effect of Covid-19.

Outstanding FVTOCI (fair value treatment of derivative instrument) assets declined to RM937mil in 1Q20 vs. RM1.3bil in 4Q19 due to the increase in MGS (Malaysian Government Securities) yields in March 2020 from the selling of foreign investors’ securities.

Nonetheless, the group’s FVTOCI assets remain higher than other peers, “he added, adding that it would provide RHB Bank with incentives to further realize profits from bond purchases in a continued low interest rate setting to help its non-fund-based income.

In addition, it said loan growth decelerated to 3.6 percent YoY, backed by mortgages, and SMEs (small and medium-sized enterprises) and overseas loans, while domestic loan growth increased by 2.2 percent YoY, slower than the 4.0 percent YoY growth in the sector.


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