RHB lowers 2018 loan growth target

However, the group expects to continue achieving record-high earnings for the full year


RHB Bank Bhd is revising downwards its loan growth target for 2018 to between 3% and 4% from as high as 6% previously, although it expects to continue achieving record-high earnings for the full year.

“We grew loans by 3.1% year-on- year (YoY) in the first half of the year ended June 30, 2018 (1H18), so most likely we will not be able to meet that 6%.

“So, we’re looking at potentially between 3% and 4%, which is still possible,” its group MD Datuk Khairussaleh Ramli told a press briefing in Kuala Lumpur recently.

The banking group’s gross loans and financing rose 3.1% YoY to RM161.4 billion in 1H18, while total domestic loans increased 4.5% YoY on mortgages and loans to small and medium enterprises (SMEs).

Customer deposits rose marginally to RM166 billion during the period, with current account and savings account rising 4.2% YoY.

Gross impaired loans stood at RM3.8 billion as at end-June 2018, while gross impaired loan ratio climbed to 2.33% from 2.23% in December 2017.

Mortgages climbed 16.4% YoY to RM50.5 billion from RM43.37 billion recorded as at end-June 2017.

Group business banking rose 7.4% YoY to RM24.6 billion from RM22.9 billion last year, mainly helped by an 8.2% YoY increase in SME loans to RM22.68 billion from RM20.96 billion previously.

Group wholesale banking loans fell 9% YoY to RM41.19 billion from RM45.45 billion a year ago, which Khairussaleh attributed to a handful of large corporate repayments in excess of RM1 billion each.

He said the group is on track to diversify its client base to limit concentration on large accounts.

“Our intent is to reduce the contribution from corporate banking — about 35% (of loans) used to be from corporate banking, but we believe we need to bring that down to 25% for sustainability of income.

“Currently, the contribution is at about 26%,” he said.

The group’s net profit rose 13.8% YoY to RM570.26 million in the second quarter ended June 30, 2018 (2Q18), while revenue was 1.1% higher YoY at RM2.66 billion.

For 1H18, the group netted its highest ever earnings of RM1.16 billion, up 16% from RM1 billion recorded previously, while revenue increased 3.6% to RM5.44 billion from RM5.25 billion in 1H17.

“If we can repeat what we recorded in 1H18 in the 2H, then full-year profit would be a record profit for us.

“We expect our topline to continue growing from net fund-based income and fee income, and credit costs to be fairly benign at current levels,” Khairussaleh said.

Key contributors to 1H18 results included a 10.8% YoY jump in net fund-based income to RM2.48 billion.

This was helped by loan book expansion and a 1.3% increase in non-fund based income to RM904.2 million — underpinned by higher net foreign-exchange gain, and trading and investment income.

Operating expenses climbed 7.6% YoY to RM1.66 billion, driven by larger personnel costs and information technology-related expenses.

Cost-to-income ratio was at 49.1% against 49.3% in 1H17.

The group has proposed an interim dividend of 7.5 sen per share for 2018.