RHB Bank Bhd’s new three-year plan is bolder than analysts expected from the country’s fifth-largest bank, particularly with the economy this uncertain. That was the verdict from research houses on March 10, less than two weeks after the bank launched the strategy, called PROGRESS27, on Feb 27.
By 2027, RHB is aiming for a return on equity above 12%, a cost-to-income ratio under 44.8% and a gross impaired loan ratio below 1.3%. The mid-sized lender says it will concentrate on loan growth, CASA expansion, cost efficiency and regional profitability. It also plans to build up its wealth, small-and-medium enterprise (SME) and wholesale banking arms, and to grow in Singapore and Cambodia.
Where the doubts are
Phillip Capital said the plan stands or falls on CASA growth and asset quality. “Achieving above-industry CASA growth may be challenging, amid heightened competition and the appeal of higher-yielding alternatives,” the house warned. Some targets, it noted, also put RHB in the same arena as bigger and smaller rivals.
It flagged a second risk. More lending to SMEs and overseas segments, both higher-risk, could make earnings swing.
MIDF Amanah Investment Bank was more upbeat, calling PROGRESS27 mostly achievable. It balked at one number: fee-based income growth of 10% a year looks overly optimistic. “These targets are highly dependent on market conditions,” the house said. “However, current financial market performance is relatively poor.” MIDF added that any economic slowdown could get in the way of the 7% annual domestic loan growth target.
The stock
Investors have not been put off. RHB shares are up more than 6% so far this year after earnings that beat expectations, and analysts remain mostly bullish. Research houses hold 15 buy calls and three hold calls, with no sell recommendations. The 12-month target price is RM7.58, which implies a potential upside of 9.7% from the last traded price.
At 10am on Monday, the shares were up three sen, or 0.44%, at RM6.91, putting the bank’s market valuation at nearly RM30 billion.
