RHB eyes 4% loan growth, further OPR cut in 2020

By SHAZNI ONG / Pic By ARIF KARTONO

RHB Bank Bhd expects loan growth to be in line with the banking system at circa 4% this year against the 4.3% expansion achieved in the financial year ended Dec 31, 2019 (FY19).

“Overall, we’re going to try to track the industry. We think the industry will probably grow at 4%, but within that 4%, for us, mortgages will still be the strongest. Maybe a high single-digit kind of growth,” RHB group MD Datuk Khairussaleh Ramli (picture) told reporters at the group’s full-year results briefing in Kuala Lumpur yesterday.

“For small and medium enterprises (SMEs) loans, we also expect slightly higher than 5% or a high single-digit, but from the corporate side, this is where we believe we’re going to face some challenges in the growth,” he added.

Contribution from the group’s Singapore loans is anticipated to remain strong as well, despite the slowdown in Singapore’s economy.

The bank also revised downward its Malaysia GDP growth projection to 4% for 2020 from 4.3% previously, amid protracted US-China trade tensions and the Covid-19 outbreak which continue to pose downside risks to the country’s exports.

Key growth drivers are private consumption, exports and an expected pick-up in private investment, Khairussaleh said.

The bank is also bracing for further cuts in the Overnight Policy Rate (OPR), which was slashed by 25basis points (bps) to 2.75% last month. Prior to that, the OPR was cut by 25bps to 3% in May last year.

“Obviously, any interest rate cut will have an impact on us. For example, (from) the earlier cut of 25bps, we could expect a 4bps reduction in our net interest margin (NIM),” Khairussaleh said.

Another OPR cut is possible, he added, depending on the impact of Covid-19 and the global economic environment.

Non-interest income will continue to be the bank’s main driver, while its fixed-income portfolio remains strong in potential gains.

RHB’s net profit rose 9.8% to RM621.01 million in the fourth quarter ended Dec 31, 2019 (4Q19) from RM565.43 million a year earlier, mainly on higher net fund-based and non-fund-based incomes and the absence of a oneoff impairment.

Quarterly revenue was up 3.4% at RM3.42 billion against RM3.31 billion the year prior.

For FY19, the bank’s earnings rose 7.7% year-on-year (YoY) to RM2.48 billion from RM2.31 billion the year before, mainly due to higher net income, lower expected credit losses for loans and higher write-back of impairment losses for financial assets.

Full-year revenue climbed 6.6% YoY to RM13.53 billion from RM12.69 billion previously.

Gross loans and financing grew 4.3% YoY to RM176.2 billion, driven by mortgages, SMEs and Singapore.

Domestic loans grew 3.9% YoY, while total customer deposits rose 6.5% to RM190.6 billion. Gross impaired loan ratio stood at 1.97%.

Malaysia’s fourth-largest lender by assets proposed a final dividend of 18.5 sen, bringing the full-year dividend to 31 sen.

The bank has also decided to maintain its general insurance business after talks to sell up to 94.7% of its interest in RHB Insurance to Tokio Marine Asia Pte Ltd fell through as both parties were unable to agree on the terms and conditions for the disposal.