RHB on track with digital bank deposit initiative


The group is expected to roll out its maiden digital bank deposit product by the end of this year, before expanding the segment to introduce financing offerings later on, said Kenanga Research. — Bloomberg

PETALING JAYA: RHB Bank Bhd’s upcoming digital bank venture with Axiata Group Bhd’s digital arm, Boost Holdings Sdn Bhd, appears on track for launch, with the group expecting to pass Bank Negara’s operational readiness review in this final quarter of 2023.

With that, the group is expected to roll out its maiden digital bank deposit product by the end of this year, before expanding the segment to introduce financing offerings later on, according to Kenanga Research, citing its recent meeting with RHB Bank’s management.

“That said, its target markets will lean towards microfinancing as mandated by Bank Negara for the digital bank licensees’ foundational stage,” the brokerage wrote.

Kenanga Research maintained its “outperform” call on RHB Bank, noting the counter would likely be monitored closely due to its tie-in with Axiata-Boost in relation to the upcoming launch of a new digital bank in the near future.

However, Kenanga Research lowered its target price for RHB Bank to RM7.15 from RM7.25 previously. This followed the brokerage’s downward revision of its 2023-2024 earnings estimates for RHB Bank by 12% and 5%, respectively, in lieu of its revised net interest margin (NIM) expectations.

It pointed out that RHB Bank’s NIM narrowed to 1.85% in the first half of 2023 (1H23) from 2.24% through 2022, as the group was not spared from the intense deposits competition spurred by rising overnight policy rate expectations in December 2022.

“Despite two consecutive quarters of margins erosion, the group may continue to see readings coming off as product rates could remain competitive in spite of peers consciously easing down their product rates,” Kenanga Research said.

“We believe this move is not liquidity-driven as the group’s loan-to-deposit ratio is still below 100%. That said, this may cause its 2023 NIM target of 2.22% to 2.25% to fall short,” it added.

Kenanga Research said RHB Bank continued to expect its loan growth performance for 2023 to be moderate at 4% to 5%, in line with its broader industry target.

“The group is still seeing sustained demand from its community and small and medium enterprise banking segments. Personal financing and credit card also appear supportive, indicating stronger consumer spending post-stabilised expectations of interest rates,” it explained, adding that this could support 2H23 performance.

RHB Bank had previously guided for gross impaired loans to come in below 1.5% in 2023, which would reflect solid improvement from 1.64% in 1H23. This target might see some deviation, with indication that impairments might still come about, Kenanga Research said.

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