Analysts tracking RHB Bank Bhd report that the lender is on course to meet the majority of its key performance indicator (KPI) targets for the financial year ending December 31, 2022 (FY22), according to data shared during a recent conference call. The technical assessment, based on the bank’s performance through the first three quarters, indicates that the institution has already surpassed four of its five headline targets, with only one metric falling marginally short.
Quantitative Performance Against KPI Benchmarks
The bank’s KPI targets for FY22 include a return on equity (RoE) of 8.5%, loan growth of 4% to 5%, a gross impaired loan (GIL) ratio of 1.7% or less, a current account savings account (CASA) or low-cost deposit ratio of 30%, and a cost-to-income (CTI) ratio of 45% or less. For the nine months ending in September 2022, RHB Bank achieved an RoE of 9.3%, loan growth of 7.5%, a GIL ratio of 1.57%, a CTI ratio of 44.8%, and a CASA ratio of 29.9%. The CASA ratio was the only target that fell just short of the mark, according to group managing director and CEO Mohd Rashid Mohamad, who recently informed analysts during a conference call.
Kenanga Research, in its analysis, maintained an “outperform” recommendation on RHB Bank with a target price (TP) of RM7. The research house noted that the group looks to surpass its initial 4% to 5% loan growth objective, led by strong progress in its retail mortgage and auto financing books. “The group is on track to reach most of its headline targets,” the statement from Kenanga Research said. The brokerage also highlighted that RHB Bank voiced higher ambitions to expand its regional operations in Singapore and Cambodia, despite starting from a considerably weaker basis than Malaysia, where regional loans account for less than 15% of total loans.
Brokerage Ratings and Forward Estimates
CGS-CIMB Research assigned an “add” rating to RHB Bank, with a TP of RM7.62 per share remaining constant. The brokerage’s analysis projects a modest 2.4% year-over-year growth in RHB Bank’s fourth-quarter net profit, supported by ongoing expansion in net interest margin from OPR hikes. This projection is based on the bank’s disclosed financial data and the current interest rate environment.
What to Watch Next
Going forward, market participants will be monitoring RHB Bank’s ability to close the gap on its CASA ratio target, as well as the trajectory of its regional expansion in Singapore and Cambodia. The bank’s fourth-quarter results, expected to be released in early 2023, will provide the final data point for FY22 KPI achievement. Analysts will also be watching for any changes to the bank’s KPI targets for the upcoming financial year, particularly in light of the current operating environment and the bank’s stated ambitions for regional growth.
