‘2017 should be better year for RHB Bank’
KUCHING: RHB Bank Bhd’s (RHB Bank) first half of 2017 (1H17) core net profit has come in line with expectations and analysts are maintaining their views that 2017 should be a better year for the group.
RHB Bank reported a net profit of RM1.001 billion for the half year ended June 30, 2017 as compared to RM915.1 million for the same period in 2016, an increase of 9.4 per cent.
RHB Bank’s core net profit was in line with the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) and consensus, accounting for 49 per cent and 50 per cent of its estimates, respectively.
“No change in our views that 2017 should be a better year for RHB Bank on the premise that the large-scale impairments seen in 2016 are likely over with credit costs expected to normalise.
“Management reiterated that no major stress exists in its portfolio in the last 18 months,” Kenanga Research said.
Kenanga Research noted that RHB Bank’s exposure to the oil and gas (O&G) industry is currently lower than in financial year 2016 (FY16) at 3.5 per cent of the group’s portfolio, of which 25 per cent is from Singapore, the bulk of its impairments.
Although loans growth was below target in 1H17, the research arm was cautiously optimistic that RHB Bank’s FY17 target was achievable on the back of strong growth and recoveries from the group’s small and medium enterprise (SME), mortgages and corporate markets supported by the focus in the affluent car market.
The research arm was still concerned over RHB Bank’s net interest margin (NIM) as deposit-taking activities are expected to intensify as banks chase for longer-term deposits driven by the expected higher demand for loans.
“However, downward pressure on NIM might be cushioned going forward with ample liquidity – with the rights issue last year – and funding costs are expected to be contained with nearly RM2.9 billion of debt securities redeemed in May 2017,” it said.
All in, Kenanga Research’s forecast earnings were maintained at RM2.061 billion for FY17, as was its target price of RM5.60 per share and ‘outperform’ call.