KUALA LUMPUR: Maybank IB Research has trimmed the financial year 2020 (FY20) earnings for RHB Bank by 2% and maintained the FY21/22 forecasts.
In a note today, the research house said RHB’s first quarter 2020 core net profit contracted 9% year-on-year (YoY), 7% percent quarter-on-quarter (QoQ) to RM571 mil.
“Positively, net interest margin (NIM) was relatively stable, declining just three basis point (bps) QoQ, as were operating expenses.
“On the flip side, the Net Order Imbalance Indicator (NOII) declined 16% YoY. Impaired loans rose marginally due to a lumpy default in the corporate property development space, while credit costs increased (partly due to a preemptive provision of RM50 mil (one-third of the quarter’s credit cost),” it said.
Maybank IB said it raised the credit cost assumption to 30bps from 27bps for FY20 but maintains 32bps for FY21.
“Positives of the group include its strong capital ratios and decent loan loss coverage of 108%, including regulatory reserves, the latter of which management does not see the need to draw down on,” it said.
Meanwhile, AmInvestment Bank said it fined-tune the 20/21 earnings by +0.4%/-0.8% to reflect slower loan growth of 2% or 3% and a moderation in deposit growth for RHB Bank.
In a note, it said the 1Q20 earnings at RM571 mil, underpinned by flat total income (+0.2% YoY) and higher provisioning for loan losses, which included a RM50 mil preemptive provision for the potential impact of the Covid-19 pandemic.
“Outstanding FVTOCI (fair values treatment of derivative instrument) reserves declined to RM937 mil in 1Q20 vs RM1.3 bil in 4Q19 attributed to the increase in MGS (Malaysian Government Securities) yields in March 2020 from the selling of securities by foreign investors.
“Nevertheless, the group’s FVTOCI reserves remain higher than most peers,” it said, adding that it will provide opportunities for RHB Bank to further realise gains from the sale of bonds in a sustained low interest rate environment to support its non-fund-based income.
Besides, it said loan growth decelerated to 3.6% YoY, supported by mortgages, and SME and overseas loans, while domestic loan growth expanded by 2.2% YoY, slower than the industry’s growth of 4% YoY. – June 1, 2020, Bernama
