AMINVESTMENT Bank Bhd has maintained its buy call on RHB Bank Bhd with an unchanged fair value of RM5.80 per share, pegging the stock to a price-to-book ratio of 0.9 times for the financial year ending Dec 31, 2020 (FY20).
Citing a conference call hosted by RHB Bank on Monday, the research house said the group does not foresee liquidity issues arising from the implementation of the relief measures announced by Bank Negara Malaysia.
“The group’s liquidity coverage ratio (LCR) was 152.7% in the fourth quarter of 2019 (4Q19), and under the stress test the group had conducted, we understand that the LCR was still above 100%,” it said in a note today.
Meanwhile, the research house said with interest rates continuing to be low moving forward, the RHB Bank group hopes to harness some of the gains from disposals of fixed income securities which have increased in value from marked-to-market gains.
“This could mitigate some of the net interest margin pressure from the overnight policy rate (OPR) cuts,” it said.
RHB Bank’s management has hinted that the group’s net interest income (NII) will be impacted by the two OPR cuts this year, with another cut likely to occur in the near term.
“In our NII estimate, we have already factored in another 25 basis points (bps) rate cut in May 2020, resulting in a total 75bps benchmark rate reduction for this year,” said AmInvestment.
Meanwhile, the research house said the implementation of the relief measures would have no negative impact on the bank’s capital ratios.
“Regulatory reserves at the group and bank entity levels stand at RM839 mil and RM353mil, respectively.
“Should the group release its regulatory reserves held against expected losses to 0% temporarily as permitted by BNM, we estimate a slight lift in the group’s and bank entity’s Common Equity Tier 1 (CET1) ratios by 0.7% and 0.4% to 17.6% and 15.5%, respectively (Dec 2019: 16.9% and 15.1%),” it said.
At 11.55am, RHB Bank’s share price went down four sen to RM4.75 with 974,200 shares changing hands. — March 31, 2020, Bernama
