MODEST OUTLOOK
Lending momentum may improve, but rising pressure on funding cost may weigh on performance, says managing director
THE banking sector is likely to see modest growth this year, says RHB Banking Group managing director Datuk Khairussaleh Ramli. This optimism arises following a 4.9 per cent increase in RHB’s net profit to RM1.49 billion for the nine months ended September 30.
THE local banking sector is expected to see modest growth this year, says RHB Banking Group managing director Datuk Khairussaleh Ramli.
Expecting lending momentum to improve in the last quarter of the year, Khairussaleh, however, said rising pressure on funding cost may weigh on the banks’ performance.
Analysts said there was no concrete catalyst and game changer on the horizon for the sector in the near term, with structural and cyclical headwinds still prevailing.
This includes moderating economy, subdued loans growth, mild downward pressure on net interest margin and rising credit costs.
RHB Bank Bhd, though, expects to do better this year, after posting 4.9 per cent growth in net profit to RM1.49 billion in the nine months ended September 30 this year, from RM1.42 billion a year ago.
This was boosted by lower impairment losses on other assets and higher net funding income, said the group.
The results were partially offset by lower non-fund based income as well as higher overheads and loan loss impairment.
“We continue to achieve consecutive quarters of sustained profitability amid the domestic market moderate loans growth and continuing global uncertainties.
“Combined with our ability to manage funding cost, our net interest margin has been holding up over the last three quarters,” said Khairussaleh yesterday.
He said notwithstanding the challenges in asset quality, the group’s earnings and performance had demonstrated its ability to capture opportunities across businesses and effectively keep a firm grip on costs.
“As we move towards the close of the year, we see stronger pipeline for our core businesses, while our balance sheet, liquidity and capital remain strong,” he added.
RHB;s group net fund based income increased by 5.2 per cent to RM3.39 billion from a year ago, due to loans growth and lower interest expense from prudent funding cost management and
redemption of sub-debts and senior notes in the second quarter of the period. This resulted in net interest margin to stabilise at 2.19 per cent over the last two quarters.
Non-fund based income for the bank was 10.9 per cent lower at RM1.32 billion, contributed largely by lower net foreign exchange gain, lower commercial/investment banking fee income, lower trading and investment income and lower insurance underwriting
surplus.
Its operating expenses rose two per cent to RM2.34 billion, driven by a rise in personnel costs and higher information technology-related expenses.
Total assets eased 0.7 per cent to RM235.1 billion as at September 30, primarily due to lower financial investments in the held-to-maturity portfolio and derivative assets.
Shareholders’ funds increased to RM23 billion, with net assets
per share improving by 5.9 per cent to RM5.74.
The group’s gross loans and financing grew 3.3 per cent yearon-year and 2.3 per cent for the first nine months to RM158 billion.
This was mainly from mortgages and small and medium enterprise, which recorded resilient annualised growth rate of 12.3 and 4.3 per cent, respectively.