MAYBANK IB is forecasting a 13% contraction in RHB Bank’s financial year 2020 (FY20) earnings and a 4% rebound in FY21.
In a note today, the research house said it has slashed RHB Bank’s net profit forecasts for FY20 to FY22) by 13%, 14% and 11% respectively, in light of slower loan growth, lower non-interest income (NOII) growth and higher credit costs.
It has also trimmed the fourth-largest lender’s loan growth to 1.8% and 2.2% for FY20 and FY21 from 3.8% and 3.8%, with an 11 basis point (bp) compression in net interest margin (NIM) (+ one bp in FY21), while NOII is expected to contract 9% in FY20 (5% in FY21).
In addition, Maybank IB has raised credit cost assumptions to 27 bps and 32 bps for FY20 and FY21 from 20 bps and 22 bps respectively.
“While still early days, management hopes to maintain FY19’s absolute dividends per share (DPS) of 31 sen, which we believe it can afford to do, with its strong capital ratios.
“This would translate into still very decent yields of greater than (>) 6% presently and it provides some buffer against volatility in earnings,” added Maybank IB.
The research house also said RHB Bank’s strong capital ratios and highest common equity tier one (CET1) ratio among peers of 16.9% puts the group in good stead at a time of much volatility such as this.
“And more pertinently, we expect RHB to be able to at least maintain FY2019’s absolute DPS even if earnings contract. We maintain a buy call on the stock with a lower target price of RM5.40,” it added.
Maybank IB said 81% of RHB’s Malaysia loan book or RM129 bil are subject to moratorium, of which 55% are retail, 16% small and medium enterprise (SME) and 29% corporate.
“Assuming 30% of corporate borrowers apply for the moratorium, the estimated cash flow impact is about RM2 bil per month.
“Corporates that have applied for the moratorium to date are mainly those in the vulnerable sectors such as tourism and hotels. The bank is currently seeing more than 100 applications per day for the SME Special Relief Fund,” Maybank IB said, in sharing highlights from a recent call with RHB Bank management.
RHB’s exposure to vulnerable sectors is about 11% of its total loans, that is 8-9% for non-retail and 2% for retail. — April 20, 2020, Bernama
