RHB Bank posts commendable FY23

Group to remain prudent in current financial year

“Operating expenditure was up slightly at 2.3% to Rm3.7bil, while we managed to pin our cost-to-income ratio at 47.5%.” Mohd Rashid Mohamad

KUALA LUMPUR: Malaysia’s fourth largest banking group, RHB Bank Bhd, is maintaining a cautious stance as it navigates 2024, being mindful of risks from external factors such as uncertainty of monetary policy stance in the United States, inflationary pressures and escalating geopolitical conflicts.

Nevertheless, it remains optimistic that global economic growth will accelerate this year, supported by easing monetary policy trends and China’s potential economic recovery, which should in turn lead Malaysia’s growth momentum.

As such, this could propel demand for credit in the Malaysian banking industry, driven by stronger credit demand from the business segment.

“Overall, the banking sector is anticipated to remain resilient, bolstered by robust capital and liquidity positions and conducive monetary policy,” said group managing director and chief executive officer Mohd Rashid Mohamad.

Releasing its fourth quarter (4Q23) and full year (FY23) results for the financial period ended Dec 31, 2023, the bank saw net profit for the quarter drop 24% yearon-year (y-o-y), despite revenue growing by 12.1% to Rm4.4bil.

The bank attributed lower net fundbased income and higher expected credit losses (ECL) during the quarter as primary reasons for the 4Q23 earnings slide.

For the full FY23, however, the group managed to post a commendable 4.8% y-o-y growth in net profit to Rm2.8bil, as turnover also notched up by 26.3% to Rm16.6bil.

RHB Bank said the improvement was led mainly by higher non-fund-based income and lower allowances for credit losses, on top of reduced tax expenses.

Divulging some key numbers that contributed to the group’s performance last year, Mohd Rashid said non-fund-based income surged 30.3% in 2023 to Rm2.3bil, partially offsetting the impact of lower net fund-based income.

“Operating expenditure was up slightly at 2.3% to Rm3.7bil, while we managed to pin our cost-to-income ratio at 47.5%,” he said.

Interestingly, while ECL may have impacted net earnings during the final three months of the year, Mohd Rashid revealed that the parameter was actually 28.4% lower y-o-y in the whole of 2023 at Rm301.5mil.

More importantly, loans grew 4.8% y-o-y, attributed mainly to growth in Singapore and the bank’s Group Community Banking, as loans in Malaysia for RHB Bank also edged up 3.4%.

In addition, Mohd Rashid said: “Our securities portfolio grew 15.7% y-o-y, while deposits were also up 7.9% mainly due to a 14.3% increase in fixed deposits and a 3% growth in current accounts-savings accounts.”

He also pointed out that RHB Bank’s gross impaired loans constituted 1.74% of lendings last year, while the group’s loan loss coverage with regulatory reserves improved to 106.2%.

As a whole, he noted that RHB Bank had amassed a total income of Rm7.77bil last year, underpinned by a net fund-based income of Rm5.45bil, while keeping an effective net interest margin of 1.93%.

Notably, Mohd Rashid also told Starbiz that the lender’s popular RHB Multicurrency Visa Debit Card/-i saw an impressive y-o-y growth of 23% last year in user base and a 72% rise in spending.

Compared to 3Q23, net profit declined by 9.9% from Rm650mil, with the bank pointing to higher allowances for credit losses, increased operating expenses and lower net funding income during the quarter, which were partly offset by higher nonfund-based income and lower share of loss in associates.

Quarter-on-quarter revenue for 4Q23 though was up 4.3% from the Rm4.2bil posted for the three months ended Sept 30.

At the same time, RHB Bank declared a second interim dividend of 25 sen per share for 4Q23, consisting of a cash payout of 15 sen per share and an electable portion under a dividend reinvestment plan of 10 sen per share.

Together with the first interim dividend, the full-year dividend amounts to 40 sen per share, equivalent to a payout ratio of 61.1% and a dividend yield of 7.3% for FY23.