• 3Q24 results was above expectations, at 80% of our forecast

• Raise 2024–26E earnings forecast by 1–4% to reflect NIM expansion

• Maintain BUY with higher GGM-derived TP of RM7.50 (from RM7.40)

Above expectations

3Q24 core PATAMI of RM833m (+15% QoQ, +28% YoY) brings 9M24 core PATAMI to RM2.3bn (+3% YoY), representing 80% and 78% of our and consensus’ forecasts, respectively. The result was above our expectation, driven by robust operating income (+11%), with net fund-based (+5%) and non-fund-based income (+26%) achieving 78% and 82% of our forecasts, respectively. 9M24 NIM expanded 2bps YoY to 1.87%, while non-fund- based income benefitted from higher fee income, forex gains, and trading and investment income. 9M24 operating costs were well managed (+9% YoY), despite continued IT investments (+25%). Notwithstanding, 9M24 credit cost rose on lower management overlay writebacks and ECL increase for a specific account in Thailand, which amounted to RM168m. On a positive note, BAU ECL grew 3% YoY. The reported ROE of 9.8% fell short of its >10% target. In comparison, the CET1 ratio stood strong at 16.6%, providing a comfortable buffer in light of the expected 70–80bps impact from the post-BASEL III implementation.

Improving key metrics

We are encouraged by the improving trend in credit charge-offs for 2024, with 3Q24 charge- offs of RM100m, significantly lower than the 1Q24 high of RM213m. Asset quality is improving despite an uptick in GILs for mortgages and overseas business (Thailand and Cambodia). Management remains focused on recoveries and restructured and rescheduled (R&R) efforts, particularly in Thailand. On the other hand, loan growth remains healthy (+4% YoY), with better momentum expected in 4Q24. Deposit growth was slightly muted at 1% YoY as RHB optimizes FD to rebalance the deposit portfolio.

Maintain BUY; higher GGM-derived RM7.50 TP

We raise our 2024–26E earnings by 1–4% after incorporating improved NIM and higher non- interest income. Subsequently, our TP is raised to RM7.50 (from RM7.40), and we maintain our BUY call. We like RHB for its undemanding valuations (0.92x 2025E P/BV with 10% ROE) and a sector-high dividend yield of 6%. Maintain BUY. Key risks to our BUY call include extended NIM compression, rising cost base, asset quality deterioration, and intense deposit competition, leading to high funding costs.

Source: Philip Capital Research - 2 Dec 2024