RHB Bank expects better earnings this year

PETALING JAYA: RHB Bank Bhd expects to deliver better financial results in 2021, mainly due to not incurring further modification losses and lower expected credit losses (ECL), said the group’s managing director Datuk Khairussaleh Ramli.

This year, the groups’s return on equity (ROE) target is 9%, compared with the ROE of 7.7% achieved in 2020, Khairussaleh told an online media briefing.

“Hopefully, of course, if there’s no further moratorium, we will not have to incur the additional modification loss that we did last year. So that alone was quite significant. And on the ECL side, we do expect this year to be lower than last year. So, on these two counts alone, we hope that with these two improvements, our performance will be better compared to last year, and hence contributing to the increase in the expected increase in ROE for 2021,” he said.

Khairussaleh also said this year, credit cost is likely to be lower than 2020’s 58 basis points, but will still remain elevated.

“Also, we think that loans will grow between 4% and 5%, and we think there is still opportunity to grow on the non-interest income side, particualrly on wealth management,” he said.

Regarding the group’s net interest margin or NIM, he said the target this year is to maintain 2020’s 2.06%. “With the ability to reprice the deposits, and interest rates being stable, and with the growth in loans that we respect, we hope that we can maintain our NIM at the same level as 2020,” he said.

For its fourth quarter ended Dec 31, 2020 (Q4), RHB Bank posted a 29.4% year-on-year (y-o-y) drop in net profit to Rm438.6mil, mainly due to higher ECL. Revenue was 10% lower to Rm3.08bil.

For the full financial year (FY20), the group posted a 18% y-o-y drop in net profit to Rm2.03bil, mainly due to net modification loss arising from the loan moratorium and higher ECL.

However, higher net fund based and non-fund based income helped mitigate the profit decrease. For FY20, revenue fell 6.9% to Rm12.6bil.

Net fund based income increased by 6.3% y-o-y to Rm5.27bil driven by proactive funding cost management, which dropped 23.8% y-o-y, supported by a 28.3% current account savings account (CASA) growth and the redemption of certain capital instruments over 2019 and 2020.

Non-fund based income rose 11.2% to Rm2.34bil, largely due to higher net trading and investment income, brokerage income and insurance underwriting surplus.

Operating expenses remained constant y-o-y at Rm3.39bil. Cost-toincome ratio improved to 47.1% compared with 48% a year ago.

As a result of setting aside pre-emptive provisions to cater for potential adverse impact to asset quality brought about by the Covid19 pandemic, ECL increased significantly from Rm275.8mil in the previous year to Rm1.145bil.

RHB Bank has proposed a final dividend of 7.65 sen per share. Together with an interim dividend of 10 sen paid on Feb 9, 2021, total dividend for FY20 will be 17.65 sen per share or a 34.8% payout ratio.