• We maintain BUY on RHB Bank with a lower fair value (FV) of RM6.30/share (from RM6.50/share previously) pegging the stock to FY24F P/BV of 0.9x supported by ROE of 9.6%. No changes to our neutral 3-star ESG rating.

• We trim our FY23F/24F/25F earnings by 8%/6.9%/5.5% to factor in lower NIM assumptions and raised CI ratio projection.

• 9M23 core earnings of RM2.2bil were within expectations, making up 73.5% of our full year forecast and 77.8% of consensus.

• The group’s 9M23 core earnings grew 2% YoY to RM2.2bil, supported by stronger non-fund-based income and lower net impairment losses.

• On QoQ basis, RHB Bank recorded lower underlying earnings of RM650mil (-19.6%) in 3Q23, contributed by higher loan provisions despite total income increasing by 4.2%.

• 9M23 total income of RM5.7bil was slightly lower by 2.9% YoY. Stronger non-fund-based income was more than offset by weaker fund-based income due to higher funding cost. The group’s non-fund-based income grew by 30.3% YoY to RM12.6bil in 9M23, driven by higher FX, derivatives, net trading and investment income. 3Q23 saw higher fee income QoQ from brokerage and commercial banking.

• Loan growth inched higher to 4.6% YoY in 3Q23 vs. 4.5% YoY in 2Q23, supported by growth in mortgages, HP, personal financing, SME and loans in Singapore. Domestic loans grew 2.6% YoY vs. the industry’s 4.3% YoY.

• 3Q23 NIM rose 3bps QoQ to 1.85%. 9M23 NIM was compressed by 35bps YoY to 1.85% owing to higher cost of funds.

• Operating expenses grew by 3.3% YoY in 9M23 largely contributed by higher personnel cost from collective agreement adjustments in 2Q23 and an increase in establishment cost. As a result of lower total income, CI ratio climbed to 47.1% in 9M23 (9M22: 44.3%), above the group’s target of ≤ 44.6% for FY23F. Management’s guidance for CI ratio for FY23F has been revised higher to 47-47.5%.

• 9M23 credit cost was 7bps vs. 24bps in 9M22. Credit cost normalised in 3Q23. After the substantial write-backs in 2Q23, remaining management overlays stood at RM0.5bil.

• The group’s GIL ratio rose to 1.79% in 3Q23 vs. 1.64% in 2Q23, contributed by upticks in impairment of mortgages, auto finance, SME, commercial and corporate loans domestically. Also, it was due to impairment of loans in Cambodia while GIL ratio for Singapore was stable QoQ.

Source: AmInvest Research - 28 Nov 2023