RHB Bank seen to achieve 2022 loan growth target
KUALA LUMPUR: RHB Bank Bhd foresees a slowdown in loan growth in the second half of this year (2H22) amid rising inflationary pressures and higher interest rates.
As the higher-interest rate environment leads to rising borrowing costs, Mohd Rashid Mohamad, the group managing director and group chief executive officer of RHB Banking Group, reckons loan demand could slow in 2H22.
“There is a lot of uncertainty in the global environment as central banks are raising interest rates around the world.
“With the higher interest rate environment, we will see the spillover (effect) which would increase borrowing costs for consumers.
“For now, we don’t see that, but eventually we foresee slower loan growth in the third or fourth quarter of this year compared to 1H22,” he said during a press conference on the banking group’s 1H22 results announcement yesterday.
Although higher inflation could impact loan growth in the country, he pointed out the effects would not be “substantial”.
Mohd Rashid expects Bank Negara to raise the overnight policy rate (OPR) by at least 25 basis points (bps) in its next meeting scheduled for Sept 7-8, 2022.
He pointed out that there was a possibility of the central bank raising its interest rates by another 25 bps towards the end of the year, should there be a risk of higher inflation.
Despite the inflationary pressures, Mohd Rashid said RHB Bank remained on track to achieve the 4% to 5% loan growth target for this year.
It is noteworthy that the group’s gross loans and financing grew 3.2% year-to-date to RM204.9bil, mainly supported by growth in mortgages, auto finance and small medium enterprise (SME) segment and Singapore.
RHB’s domestic loans and financing also grew 2.3% year-to-date.
As of June 2022, gross impaired loans (GIL) stood at RM3.3bil, with a GIL ratio of 1.62%, compared with RM3bil and 1.5% respectively as of March 2022, and RM3bil and 1.49%
respectively as of December 2021.
In a filing with Bursa Malaysia, RHB Bank noted that its net profit fell 9.5% to RM634.82mil in the second quarter ended June 30, 2022 (2Q22) from RM701.34mil a year ago, mainly due to the lower non-fund-based income and higher operating expenses.
The group explained that weaker brokerage income, fund management fees, unit trust fee income and corporate advisory fees were the key factors dragging the bank’s non- fund-based income in the quarter.
Revenue for the period was marginally up 2.1% to RM2.98bil compared to RM2.92bil in the corresponding period a year ago.
For 1H22, RHB Bank’s net profit slid 8.6% to RM1.23bil from RM1.35bil a year ago. The 1H22 revenue was relatively flat at RM5.84bil compared to RM5.83bil in 1H21.
Despite the challenging environment, Mohd Rashid said the group had delivered a
“resilient” financial performance underpinned by strong fundamentals.
This was given its robust capital, healthy liquidity position and adequate coverage for loan losses.
“We nevertheless remain watchful of the uncertainty surrounding the pace of economic recovery and will continue to maintain our prudent stance while closely monitoring our asset quality,” he noted.
Moving forward, he expects the group’s earnings to be bolstered by more investment banking activities, the growing wealth management segment and increased net fund- based income on the back of rising interest rates. Net fund-based income improved to RM3.03bil for the quarter, driven by higher gross fund-based income, which grew 6.7%
year-on-year supported by a loan growth of 7.3%.
Net interest margin (NIM) for the quarter was 2.23% compared with 2.15% in the corresponding period a year ago.
In line with its performance, RHB Bank has declared an interim dividend of 15 sen per share, consisting of a cash payout of 10 sen per share and an electable portion under the dividend reinvestment plan of five sen per share.
“This is equivalent to a dividend payout ratio of 51.2%,” said Mohd Rashid. Earnings per share was lower at 15.28 sen in 2Q22 from 17.49 sen in 2Q21.
Two weeks ago, RAM Ratings upgraded the long-term financial institution ratings for RHB Bank to AA from AA2, with a stable outlook.
Following the upgrade, Rashid said RHB had the ability to remain resilient and sustain improvement in credit metrics amid the challenging environment.
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