Softer 2Q expected from RHB Bank, valuation remains compelling
KUCHING: In spite of projections of a softer second quarter of financial year 2018 (2QFY18) performance from RHB Bank Bhd (RHB Bank), analysts note that valuation continues to be compelling.
AmInvestment Bank Bhd (AmInvestment Bank) recalled that in 1QFY18, RHB Bank recorded a loan growth of 4.3 per cent year on year (y-o-y) against the group’s six per cent target for FY18.
The research firm noted that retail loans are seen to be picking up in pace supported by improvements in auto and personal loans taking advantage of the tax holiday while the growth for business banking loans, particularly the small and medium enterprise (SME) and Commercial segments, has been decent.
“Nevertheless, we understand the wholesale banking loan growth remains challenging impacted by repayments as well as due to large corporates in the wait- and-see mode pending more clarity on the direction and policies of the new government,” it said.
On RHB Bank’s 2QFY18 non-interest income (NOII), it is expected by AmInvestment Bank to be softer quarter on quarter (q-o-q).
The research firm went on to note that this will be contributed by the slower pace in equity and debt capital markets, lower trading income with a marked-to-market impact of securities (AFS) from the rise in yields and decline in FX gains.
“The outlook for NOII is challenging for now. However, this may turn more positive ahead depending on initiatives or measures to be announced in the upcoming budget and the greater clarity on the government’s policies and regulations.”
As for RHB Bank’s net interest margin (NIM) in 2QFY18, AmInvestment Bank expected it to taper from 1QFY18’s 2.28 per cent which had expanded nine basis points (bps) q-o-q due to the 25bps overnight policy rate (OPR) hike.
It said that funding cost will rise from the repricing of deposits, particularly fixed deposit (FD) rates adjusting to the OPR increase in January 2018.