Investment Highlights

• We maintain BUY on RHB Bank with a lower fair value (FV) of RM6.10/share from RM6.60/share. We now peg the stock to FY24F P/BV of 0.8x (previously: 0.9x) based on a lower FY24F ROE of 9.1%. No changes to our neutral 3-star ESG rating.

• Our FY24F earnings have been trimmed by 4% due to increased credit cost assumption from 20bps to 25bps.

• 1Q24 earnings of RM730mil were within expectations, making up 24.6% of our full-year forecast and 25.7% of consensus estimate.

• Net profit in 1Q24 declined by 4.1% YoY, attributed to higher provisions, operating expenses (OPEX) and share of losses from associates, partially offset by an increase in non-fund-based income. Fund-based income was flattish YoY, impacted by NIM compression.

• On QoQ basis, RHB Bank recorded an increase in net profit by 24.6% due to higher total income (improvement in both fund and non-fund-based income), lower OPEX and allowances for loan losses.

• 1Q24 saw a total income growth of 9.5% YoY to RM2.1bil, underpinned by higher net gains from fx and derivatives coupled with stronger income from trading, investments and insurance.

• Loan growth accelerated to 5.4% YoY in 1Q24 vs. 4.8% YoY in 4Q23, supported by growth in Singaporean loans, mortgages, auto finance, domestic SME and commercial loans. Domestic loans expanded by 3.6% YoY, below the industry’s 6% YoY. Overseas loans grew 17.1% YoY, led by Singapore and Cambodia.

• 1Q24 NIM improved slightly to 1.83% from an average of 1.82% in FY23. This was in line with management’s guidance of 1.8%-1.9% for FY24. CASA ratio was marginally higher at 29% in 1Q24 compared to 27.9% in 4Q23. The group continued to utilise FX swaps to manage its liabilities. This initiative resulted in an income of RM82mil under the NOII line in 1Q24. Including the income from FX swaps, its NIM in 1Q24 would have been higher at 1.94%.

• OPEX In 1Q24 rose by 12% YoY, driven by higher personnel, IT and marketing expenses. As a result of growth in OPEX outpacing total income, CI ratio rose to 45.9% in 1Q24 (1Q23: 44.9%).

• Reported credit cost of 38bps in 1Q24 was higher than 10bps in 1Q23 and management’s guidance of 20-25bps for FY24F. Based on our estimates, 13bps or RM73mil of the credit cost in 1Q24 was provisions set aside for overseas operations as restructuring efforts of some international loans did not bear fruit.

• The group’s GIL ratio climbed to 1.83% in 1Q24 vs. 1.74% in 4Q23. Contributing to the rise was an increase in domestic GIL ratio (mainly higher impaired SME loans) as well as higher GIL ratio for international business in Thailand and Cambodia.

Source: AmInvest Research - 30 May 2024