Malaysia’s fourth-largest banking group went into the final month of 2022 ahead of its own scoreboard. RHB Bank Bhd was on course to hit most of its key performance indicator targets for FY22, The Star reported in early December, despite a difficult operating environment.
The FY22 goals the bank had set itself were demanding enough: 8.5% return on equity, 4% to 5% loan growth, a gross impaired loan ratio of 1.7% at worst, low-cost deposits at 30% of the base and a cost-to-income ratio capped at 45%. Briefing analysts on a conference call, chief executive Mohd Rashid Mohamad, the group managing director, said the bank had already beaten four of its five KPI targets for the year to that point, with the CASA ratio the only laggard.
The nine-month numbers backed him up. Through September 2022, RHB posted RoE of 9.3% and loan growth of 7.5%, well beyond plan, while gross impaired loans sat at 1.57%, cost-to-income at 44.8% and CASA at 29.9%, a whisker under the 30% bar.
Sell-side analysts liked what they saw. Kenanga Research kept its “outperform” call and an unchanged target price of RM7, writing: “The group is set to meet most of its headline targets and looks to exceed its initial 4% to 5% loan growth target, driven by solid headway in its retail mortgage and auto financing books.” It also flagged that “The group also expressed stronger aspirations to grow its regional operations in Singapore and Cambodia, albeit at a much lower base as compared to Malaysia (less than 15% of total loans).”
CGS-CIMB Research went further, naming RHB its top sector pick on the view that the bank stood among the biggest winners from Malaysia’s overnight policy rate hikes, and repeated an “add” recommendation with its share-price target unchanged. “We project a small 2.4% year-on-year increase in RHB Bank’s fourth-quarter net profit, underpinned by continuous expansion in net interest margin from OPR hikes,” the brokerage said.
