PETALING JAYA: The outlook for RHB Bank Bhd is encouraging this year judging from its loan growth and healthy net interest margin (NIM) although the one-off Cukai Makmur (prosperity tax) may be a drag on its earnings.
The lender is also expected to see strong earnings rebound in 2023.
Maybank Investment Bank (Maybank IB) in a research note said the operating outlook for RHB Bank is positive as loan growth is seen at least 4% to 5%, and NIM appears stable a with potential upside, while loans under repayment assistance are 4.5% of total loans.
While Cukai Makmur is expected to be a drag this year, the research house anticipated strong earnings rebound in the financial year (FY) 2023 of 24% (minus 12.8% in FY22).
Oil and gas related loans and bonds totalled RM3.7bil as of end-Dec 2021, making up 1.9% of RHB’s total loans.
However, Maybank IB said having instituted overlays, the loan loss coverage on both oil and gas loans and bonds is currently more than 100%.
RHB Bank foresees credit cost to range around 30 basis points (bps) to 35 bps for FY22 and initial expectations are that FY23 credit cost could remain above pre-Covid-19 levels of 20 bps to 25 bps.
The bank’s common equity tier one (CET1) of 17.2% (end-December 2021) is the highest among domestic peers.
In FY21, management proposed a final dividend per share (DPS) of 25 sen, taking FY21 DPS to 40 sen. This represents a payout ratio of 62.9%.
“We have assumed a payout ratio of 50% moving forward and there is room for an upside surprise if the bank takes its payout ratio back to around the 63% level. This would then take FY22’s dividend yield to more than 6%,” it added.
RHB Bank saw a 43% year-on-year increase in its net profit to RM631.17mil for the fourth quarter ended Dec 31, 2021 from RM438.63mil earlier, due to lower expected credit losses.
Maybank IB is maintaining its “buy” call on the stock and has raised its target price to RM6.90 from RM6.30 previously.
For FY21, RHB’ Banls net profit improved by 28.82% year-on-year (y-o-y) to RM2.62bil from RM2.03bil a year earlier.
Revenue dropped by almost 6% y-o-y to RM11.75bil compared with RM12.5bil in the preceding corresponding period.
For FY21, its gross loans and financing grew 6.7% y-o-y to RM198.5bil, mainly supported by growth in mortgage, automotive finance, small and medium enterprise, commercial and Singapore segments.
Gross impaired loans was at RM3bil as of Dec 31, 2021 with gross impaired loans ratio of 1.49%, compared with RM2.6bil and 1.32% respectively as of September 2021, and RM3.2bil and 1.71% respectively as of December 2020.