KUALA LUMPUR (February 26): RHB Bank Bhd expects the group’s lending to increase between 4% and 5% in fiscal year 2021 (FY21), slightly less than the 5.6% reached during FY20, driven by growth in the mortgage, automotive finance, small and medium enterprise (SME) segments as well as its Singapore operations.
Its Malaysian segment saw 4.5% year-on-year loan growth in FY20, outpacing industry growth.
RHB Group CEO Datuk Khairussaleh Ramli said the bank expects 2021 to remain difficult, given the resurgence of Covid-19 cases and the extended movement control order, which could hamper the resumption of economic activities.
“We believe there are still opportunities for growth on the non-interest income side, particularly in wealth management. We believe the brokerage side will continue to be strong. So far in January we’ve had a good month, ”Khairussaleh said in a virtual briefing following the release of the group’s fourth quarter results.
RHB’s FY20 net profit fell 18% year-on-year to RM2.03 billion from RM2.48 billion, driven by net change losses resulting from the moratorium on loans granted to its customers and by higher expected credit losses (ECL).
ECL increased significantly from RM 275.8 million in the previous year to RM 1.15 billion in FY20. The full-year credit expense ratio increased to 0.58% from 0.18% the previous year.
Khairussaleh said RHB expects better performance in FY21, although he warned that the cost of credit, which is expected to be lower, will always remain high.
“We now think it’s about making sure people can recover. They’ve been through the pandemic, so the challenge for us is to see how quickly our customers can recover. Having said that, we believe that the ECL this year should be lower than that of 2020, ”he said.
The net interest margin (NIM) is expected to be maintained this year from the 2.06% recorded in FY20, Khairussaleh said, expecting interest rates and growth in loans are stable. Return on equity is expected to reach 9% in FY21, compared to 7.7% in FY20.
Khairussaleh said RHB’s fundamentals remain strong, as evidenced by strong capital, liquidity and loan loss hedging positions, despite operating in an extremely difficult and unprecedented economic environment.
RHB’s common equity tier-1 (CET-1) and the group’s total capital ratio were 16.19% and 18.37% respectively during FY20, compared to 16.27% and 18, 59% previously.
“Economic stress from the pandemic may impact capital ratios, but we expect the level to always be well above our internal targets and the minimum regulatory requirement,” he noted. .
RHB shares finished three sen or 0.56% higher at RM 5.42 today, for a market cap of RM 21.73 billion.