RHBCap revises strategy, to focus on organic growth

KUALA LUMPUR: RHB Capital Bhd (RHBCap), which plans to transfer its listing status to RHB Bank Bhd and to list the latter in January 2016, has tweaked its strategy and will now focus on organic growth with emphasis on performance and profits, instead of expanding through mergers and acquisitions (M&As).
“When we launched the (previous) strategy, it was on the back of M&As overseas, particularly in Indonesia. At the moment, we’re still unable to make any progress in our entry into Indonesia as far as the commercial bank is concerned,” RHBCap group managing director Datuk Khairussaleh Ramli (pix) told a media conference after announcing the group’s results for the six months ended June 30, 2015 (H1) here last Friday.
In line with its aim to be a leading multinational financial services group by 2020, he said, it aspires to be among the top three banks in Malaysia or top eight in Asean by performance. The group also aims to be a regional powerhouse in Asean with a 20% profit contribution from international operations, compared with a previous target of 40%.
Currently, Singapore contributes about 7.2% to profits. About 80% of RHBCap’s overseas contribution comes from Singapore, and it is expected to drive its international operations.
Khairussaleh said there will be no M&A talks with AMMB Holdings Bhd in the short term, stressing that it will focus on executing its reframed strategy.
“We believe we can grow on our own. What’s key for us is to focus on our fundamentals and improving our businesses.
“As far as M&A is concerned, we will not close any opportunities but it must make sense in the form of value accretive, being complementary and so on.”
On the weakening ringgit against the US dollar, Khairussaleh said RHBCap’s exposure to the greenback is 8% to 9%.
“Whatever we borrow as far as funding is concerned, we keep them in dollar and we lend them back in dollar so it’s not adversely affecting us. We believe the bulk of our clients’ revenue is also in dollar, so there is a natural hedge.”
Khairussaleh announced the streamlining of RHBCap’s direct subsidiaries (RHB Investment Bank, RHB Insurance and others) to RHB Bank and to establish RHB Bank as the new operating holding company. Thereafter, RHB Bank will assume listing status of RHBCap and RHBCap would be wound up.
RHBCap targets a conservative loan growth of 6% to 7% this year, as well as to achieve a 13% return on equity (ROE) in 2015 and 15% ROE in 2020.
“We were affected by large corporate repayments in Q1 and because of that our loans grew only 1.5% (H1). Looking at the pipeline that we have, we think H2 should be better than 1.5%,” Khairussaleh said.
For the second quarter ended June 30, 2015, its net profit fell 5.7% to RM524.59 million from RM556.51 million a year ago on higher interest expense and the absence of impairment losses written back on other assets. Revenue rose 7.6% to RM2.64 billion compared with RM2.45 billion in the previous corresponding quarter.
For the six months period, its net profit remained flat at RM1 billion. Excluding a one-off impairment write-back on other assets in 2014, normalised profit was higher by 5.8%. Revenue jumped 10% to RM5.34 billion from RM4.85 billion a year ago.