RHB Bank nine-month earnings rise to RM1.49bil
Bank achieves consecutive quarters of profits amid moderate loan growth
PETALING JAYA: RHB Bank Bhd’s nine-month net profit to Sept 30 improved 4.9% to RM1.49bil on the back of a 1.78% decline in revenue to RM7.87bil, mainly due to lower impairment losses on other assets and higher net funding income, partially offset by lower non-fund-based income, higher overheads and higher loan loss impairment.
For the third quarter to Sept 30, RHB’s net profit dropped 3.27% to RM488.83mil on the back of a 1.23% drop in revenue to RM2.62bil due to allowances for impairments and higher operating expenses.
This is the third quarter RHB has declared impairment costs. Thus, earnings per share also dropped to 12.2 sen from 12.6 sen previously. No dividends were declared. As of the period, RHB had a net tangible asset per share of RM5.74.
In a statement to Bursa Malaysia, RHB said that allowances for impairment on loans and financing were higher at RM312.6mil, primarily due to a higher collective impairment, partially offset by lower individual impairment. This was for the nine-month period.
Impairment losses on other assets for the last two years were primarily provided for corporate bonds in Singapore, reflecting market developments in the oil and gas industry, it said.
RHB said that compared to December 2016, gross impaired loans declined slightly to RM3.6bil, with the gross impaired loans ratio improving to 2.31% from 2.43%.
“We continue to achieve consecutive quarters of sustained profitability amid the domestic market’s moderate loan 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 group managing director of RHB Banking Group Datuk Khairussaleh Ramli.
“Notwithstanding the challenges in asset quality, our earnings and performance demonstrated our ability to capture opportunities across our businesses and effectively keep a firm grip on costs.
“As we move towards the close of the year, we see a stronger pipeline for our core businesses, whilst our balance sheet, liquidity and capital remain strong,” he said.
Over the nine-month period, net fund-based income increased by 5.2% to RM34bil from a year ago mainly due to loan 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 has resulted in net interest margin stabilising at 2.19% over the last two quarters,” said RHB.
Meanwhile, non-fund-based income was 10.9% lower at RM1.32bil, contributed largely by a lower net foreign-exchange gain, lower commercial and investment banking fee income, lower trading and investment income and lower insurance underwriting surplus.
This was partially offset by an increase in net wealth management fee income and higher bro- kerage income in line with better trading volumes.
Nonetheless, operating expenses rose by 2% to RM2.34bil from a year ago, driven by a rise in personnel costs and higher IT-related expenses as the group continued to invest in technology infrastructure and capabilities.
This was offset by a decline in office rental and related premises maintenance cost. The group’s disciplined cost-management efforts delivered an improved cost-to-income ratio of 49.6% from 50% for financial year 2016.
Total assets decreased by 0.7% to RM235.1bil as at Sept 30 primarily due to lower financial investments in the held-to-maturity portfolio and derivative assets, partially offset by growth in loans and financing and cash and short-term funds.
Shareholders’ funds for the group increased to RM23bil, with net assets per share improving by 5.9% to RM5.74 as at Sept 30.
The common equity tier-1 and total capital ratio of the group remained strong at 13.6% and 17.9%, respectively.
“These capital ratios are well above the Basel III minimum transitional arrangement requirements of 5.75% and 9.25%, respectively, positioning the group as one of the best capitalised banking groups in Malaysia,” said RHB.
Meanwhile, the group’s gross loans and financing grew by 3.3% year-on-year (y-o-y) and 2.3% for the first nine months to RM158bil.
The increases were mainly from mortgages and the SME segment, which recorded a resilient annualised growth rate of 12.3% and 4.3%, respectively.
RHB said that customer deposits increased by 1.7% for both y-o-y and the first nine months to RM168.5bil.
Total current and savings account (CASA) registered a strong growth of 11.9% over the year and 7.4% year-to-date, with the CASA composition improving to 27.1% as at Sept 30 from the 25.6% recorded in December 2016.
The group’s loan-to-deposit ratio stood at 93.8%, whereas the liquidity coverage ratio and net stable funding ratio were above the regulatory requirement as at September 2017.
Compared to December 2016, gross impaired loans declined slightly to RM3.6bil, with the gross impaired loans ratio improving to 2.31% from 2.43%.
Growing stronger: Khairussaleh says the bank sees a stronger pipeline for its core businesses, while its balance sheet, liquidity and capital remain strong.