KUALA LUMPUR (Aug 29): RHB Bank Bhd may experience an “uptake” in loan loss provisions in the second half of this year as the gross impaired loan (GIL) ratio for its small and medium enterprise (SME) customers is trending upwards.

“We see a bit of a high GIL trend in the SMEs, micro-SMEs especially, this is an area that we are closely monitoring,” said RHB group managing director and chief executive officer Mohd Rashid Mohamad.

“Perhaps an uptake [in provision] would be possible, but we are quite confident that we would be able to maintain our GIL ratio below 1.7% for 2022,” he said in a virtual media briefing in conjunction with the release of the group’s results for the second quarter ended June 30, 2022 (2QFY22).

RHB recorded a GIL ratio of 1.62% for 2QFY22, up from 1.5% in 1QFY22 and 1.49% in 4QFY21. This compares with the industry level of 1.65% in 2QFY22, which increased from 1.55% in 1QFY22 and 1.50% in 4QFY22.

For 2QFY22, allowance for credit losses on financial assets fell 83% to RM38.6 million from RM227.26 million, mitigating the adverse impact from lower non-fund based income.

RHB, the fourth largest bank in Malaysia by assets size, saw its net profit fall 9.5% to RM634.83 million for 2QFY22, from RM701.34 million a year ago, weighed by higher operating expenses, weaker brokerage income, fund management fees, unit trust fee income and corporate advisory fees.

This is despite net interest income rising 1.8% to RM1.03 billion from RM1.01 billion.

The group declared a dividend of 15 sen per share for 1HFY22, equivalent to a 51.2% payout ratio.

Asked if RHB Bank would repeat its FY21 bumper dividend payout this year, Mohd Rashid said the management is aiming for a payout ratio of 40% to 50% in FY22 but this would depend on the group’s financial performance going forward.

“We rebalanced the return to shareholders and capital growth [in FY21]. We will look at this from time to time. Our guidance is at 30% payout, we are looking at paying between 40% and 50%. If we do okay in 2HFY22, we should be able to give a high dividend,” he said.

Last year, RHB declared dividends of 40 sen per share or a 63% payout ratio, up from 17.65 sen per share or 34.8% payout ratio in 2020.

In terms of loan growth, Mohd Rashid expects a slowdown in the second half of FY22 amid a higher interest rate environment, but is still confident of meeting the bank’s targeted growth of 4% to 5% this year.

“We foresee [loan growth] could be slower as compared to the first half, as high inflation and interest rates could potentially affect loan growth, but not substantially.

“We are at 3.2% [growth] now, we believe we can achieve 4-5%, or maybe move towards 5% by end of the year,” he added.

Mohd Rashid said the group’s earnings will continue to be supported by net fund-based income, thanks to the higher interest rate environment.

“We are seeing some of the investment bank activities coming back. That is also part of the potential fee income coming in, but what I foresee that will come back and perhaps help most of the financial institutions is wealth management [fee],” he said.

Asked whether RHB would revisit a potential merger with AMMB Holdings Bhd, Mohd Rashid said no such discussion is being held, and the management’s current focus is to grow organically based on the group’s three-year strategy known as Together We Progress 24 (TWP24).

“For now, no, nothing on the table. As of now, TWP24 is focusing more on building our organic opportunities. Of course, like I always mention, if there is an opportunity, we will look and reassess,” he said.

A proposed merger with AMMB via an all-share deal, made in 2017, was scrapped after almost three months of negotiations.

RHB’s largest shareholder is the Employees Provident Fund with a 41.93% stake, followed by OSK Holdings Bhd at 10.21% and the Retirement Fund Inc (KWAP) at 5.29%.

Asked on the progress of launching its digital bank jointly with Axiata Group Bhd’s fintech arm Boost Holdings Sdn Bhd, Mohd Rashid said staff from both groups have formed a team that is in the midst of evaluating the infrastructure available for the new venture.

“We engage with and update Bank Negara on the progress. Bank Negara gave us up to 24 months for it to be launched, and we foresee that it could be launched earlier, between 16 and 18 months. [But] we have not yet gone to the stage of agreeing on the name for [this] JV bank,” he said.

The 60:40 joint venture between Boost and RHB is one of the five digital bank licences the central bank provided in April.

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