RHB profit hit by provisions, lower revenue

by IZZAT RATNA

RHB Bank Bhd’s net profit dropped 11% to RM500.3 million for the first three months of this year as the lender’s earnings continued to be hit by provision allowance, lower revenue and loss at its Singapore business unit.

Revenue for the country’s fourth-largest lender by assets fell 3.4% to RM2.62 billion for the first-quarter ended March 31, 2017 (1Q17), compared to RM2.71 billion recorded a year ago.

The lender said in a statement yesterday allowances for impairment on loans and financing increased to RM132.4 million from a year ago, due to additional individual impairment allowances for corporate accounts that were classified as impaired last year.

Meanwhile, its Coperations posted a pretax loss of S$5.9 million (RM18.3 million) compared to a pretax profit of S$515.8 million for the quarter under review, due to higher impairment losses. The Singapore operation for RHB also recorded a lower net and non-fund-based income.

For the whole of the 2016 financial year (FY16), RHB provided RM308.73 million for loans impairment, financing and other losses last year, including RM253.5 million in 2Q16 for a corporate bond in Singapore.

The slump in Singapore’s oil and gas sector had hurt lenders in the republic and Malaysia.

Meanwhile, RHB’s net fund-based income declined 1.2% to RM1.09 billion from a year ago, as loans growth and lower funding expenses were depressed by margin compression. Net interest margin was 2.17% for the current quarter compared to 2.22% in the corresponding quarter.

RHB group MD Datuk Khairussaleh Ramli said the lender had moved from a challenging 4Q16.

He said the small and medium enterprises and Islamic banking portfolios had maintained a strong performance for 1Q17, while current accounts and saving accounts composition continued to strengthen.

“RHB will continue to pursue selective growth while managing asset quality and enhancing productivity. We expect a better performance this year compared to 2016, but we remain vigilant to any headwinds in the operating environment,” he said in a statement yesterday.

Operating expenses for the first three months rose 1.9% to RM761.2 million from a year ago, as the company worked to improve productivity, cut costs and invest in technology infrastructure and capabilities.

The cost management initiatives had reduced the lender’s cost to income ratio to 48.9% from 50% for FY16.