AmInvest Research retains buy on RHB Bank, FV of RM6.90

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KUALA LUMPUR: AmInvestment Research is maintaining its buy recommendation on RHB Bank with an unchanged fair value of RM6.90 a share.

It said on Friday, it had pegged the stock to FY22 price-to-book value (P/BV) of 0.9 times, supported by a return on equity (ROE) of 10.3%.

“We lower our FY21 net profit by 5.3% after increasing our credit cost assumption to 40bps from 30bps, ” it said.

AmInvest Research said from its virtual meeting with RHB Bank management on Thursday, it understands the total repayment assistance (RA) (group retail banking, group business banking and group wholesale banking) has tapered to RM14.3bil as of mid-May 2021, constituting 8.5% of the total domestic loans. This compared to 10.4% as of end-March 2021.

The outstanding RA for retail loans declined slightly to RM8.2bil (8.5% of total domestic retail loans) as at mid-May 2021 vs. RM8.3bil as at end-Mar 2021, 9.0% of total domestic retail loans.

Meanwhile, the outstanding RA for business banking (BB) and wholesale banking (WB) loans stood at RM6.3bil and RM2.4bil respectively representing 12.3% and 3.9% of the group’s total domestic BB and WB loans respectively.

“With the continued lockdown and stricter measures in selected areas, particularly Selangor and KL, we expect upticks in the group’s total RAs. Total RAs are likely to rise from 8.5% of total domestic loans as at mid-May 2021.

“On the latest 6-month moratorium commencing July 7, 2021 for all opt-in individual (B40, M40 and T20) and SME borrowers, we understand that interest will continue to be accrued and charged for all loans and financing while compounded interest and penalty charges will be waived.

“With that, we expect modification (mod) loss in 3Q21 to be significantly lower than 2Q20’s RM392mil (net). Recall, for the blanket automatic moratorium in 2020, accrued interest had to be waived for fixed rate HP and personal loans/financing, ” it said.

AmInvest Research said through conservative front loading of provisions in FY20 (RM556mil) and top up in pre-emptive provisions in 1Q21 (RM94mil), total provisions buffers amounted to RM650mil.

It noted these buffers remained unutilised and will be able to cushion against the impact of the latest lockdown.



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