Brokerage turns more positive on RHB

PETALING JAYA: HLIB Research is turning more positive on RHB Bank operationally, due to various progresses made to achieve the bank’s IGNITE2017 transformation programme.

Despite this, it said it remained concerned on RHB’s asset quality, which had surprised with additional impairment for two quarters.

“Should the asset quality issue be addressed in the upcoming results for third-quarter financial year 2017, it may represent a re-rating catalyst for RHB,” the research house said.

It maintained its “hold” call on the counter as well as its target price of RM5.50.

On the bank’s performance in the first half, the research house noted that the spike in loan-loss provision by 18.5% year-on-year to RM165mil was mitigated by 3.8% higher net interest income and declining operational expenditure by 2.5%, delivering a net profit of RM1bil.

Excluding the oil and gas account that had been written-off, absolute gross impaired loan continued to progress well with RM100mil of reduction, lowering gross impaired loan ratio to 2.29% in the second quarter of 2017.

“We continue to remain watchful on RHB’s credit cost despite its exposure on oil and gas easing to 3.7% of total loans.

“We note that under-the-watchlist category has also declined to RM1.8bil as at second-quarter 2017,” it added.

On investment banking, the research house expects the business to regain traction after the disruption from the aborted merger attempt.

In July 2017, RHB completed the transfer of treasury business and structured lending business from RHB Investment Bank to RHB Bank.

“Following this, we expect its investment bank unit will resume delivering stable non-interest income to RHB post-failed merger,” it said.

The research house also does not discount the possibility of merger and acquisition (M&A) for RHB as existing financial institutions continue to look for opportunity to enlarge market dominance.

“Moreover, current valuations for Malaysian banks are below their average book value, making M&A attractive for now than ever,” it added.

Shares of RHB closed unchanged at RM5.15.

Should the asset quality issue be addressed in the upcoming results for third-quarter financial year 2017, it may represent a re-rating catalyst for RHB. HLIB Research