CEO Mohd Rashid says RHB Bank’s digital bank will be launched in the first quarter of 2024.
PETALING JAYA: RHB Bank Bhd, which reported a net profit rise of 30% versus the first half of 2023, is confident of meeting its 4% loan growth target this year despite soft market conditions.
The fifth-largest bank by market capitalisation had previously projected a loan growth of 4% to 5% in 2023.
RHB Bank also expects the elevated funding costs and net interest margin compression to improve towards the end of the year.
Moving forward, the banking group said it will focus on “loan growth drivers”, especially in three segments, namely, retail, small and medium enterprises (SME) and Singapore.
“We will defend our retail and current account and savings account (CASA) deposits. We will also seek alternative initiatives to manage funding costs better,” RHB Bank group managing director and chief executive officer Mohd Rashid Mohamad said at a press conference.
Mohd Rashid acknowledged that the banking group faced persisting cost escalation from inflationary pressure.
“Nevertheless, we will continue to maintain cost discipline and invest strategically in information technology and digital to drive efficiencies and improve capabilities,” he said.
Mohd Rashid also highlighted that RHB Bank’s digital bank will be launched in the first quarter of 2024.
The digital bank will be jointly owned with Axiata Group Bhd
’s financial technology (fintech) arm, Boost. The RHB-Boost consortium was one of the five digital banking licence recipients announced by Bank Negara in April 2022.
Looking ahead, Mohd Rashid expects volatility to linger in RHB Bank’s operating markets. However, he believes that the recovery seen by the bank in non-fund-based income will be sustained.
In the second quarter ended June 30, RHB Bank’s net profit was lifted by higher non-fund-based income and lower expected credit loss (ECL).
Net profit rose by 28.4% y-o-y to RM808.7mil as compared to RM630.07mil a year earlier.
Revenue was recorded at RM4.05bil, representing an increase of 37.2% from the same quarter last year.
Earnings per share was at 18.95 sen for the quarter under review. In light of the performance, the board of directors declared an interim dividend of 15 sen per share, representing a payout ratio of 40.9%.
Cumulatively, in the first six months ended June 30, RHB Bank registered a net profit of RM1.57bil, up by 29.5% y-o-y.
The higher bottom line was achieved on the back of higher non-fund-based income, which jumped 46.3% to RM1.07bil, mainly due to an increased net gain on foreign exchange and derivatives, as well as net trading and investment income.
The bank also recorded lower ECL, which declined 144.4% y-o-y due to a writeback of management overlay. Excluding writebacks, normalised credit cost stood at 0.21% compared with 0.27% for the same period last year.
Net fund-based income, meanwhile, fell 10.4% to RM2.72bil on higher funding costs, mainly owing to fixed deposits growth of 16.4% y-o-y.
Net interest margin (NIM) for the quarter was recorded at 1.82%. For the full year, RHB Bank expects a NIM of 1.8% to 1.9%.
Mohd Rashid pointed out that RHB Bank’s gross loans and financing grew 0.9% to RM214.2bil as at end-June 2023, as compared to RM212.2bil at end-2022.
This was mainly supported by growth in mortgage, auto finance, SME and Singapore.
“Gross impaired loans were RM3.5bil as of June 2023 with a gross impaired loan ratio of 1.64%, compared with RM3.3bil and 1.55%, respectively, as of December 2022.
“The loan loss coverage ratio for the group, including regulatory reserve, was at 108.5% as at June 30, compared with 130.3% in December 2022,” according to Mohd Rashid.
Meanwhile, customer deposits increased 0.9% in the first six months of 2023 to RM229.3bil, mainly due to growth in retail and SME deposits of 9.8%.
CASA composition stood at 27.6% while the liquidity coverage ratio remained sound at 136.7% as at June 30.
RHB Bank’s return on equity was recorded at 10.6%.
“Our capital position remained strong. The group’s common equity tier one and total capital ratio stood at 16.7% and 19.4%, respectively,” stated Mohd Rashid.
