RHB Bank to keep close tabs on oil & gas sector

KUALA LUMPUR: RHB Bank Bhd, which has denied reopening merger talks with AMMB Holdings Bhd, believed it has done enough to manage its risks and exposure to the oil and gas (O&G) sector and will continue to monitor the sector closely for the rest of the year.
Group managing director Datuk Khairussaleh Ramli said the O&G sector is still going through a phase of consolidation, which he thinks is not over yet.
“We believe perhaps last year was the worst we’ve seen. We will still continue to monitor this portfolio closely for any stress going forward. What is good is that oil price has stabilised but we’ve not seen enough consolidation in the industry to make sure that the new normal is established,” he told a press conference after its AGM yesterday.
RHB is eyeing for its gross impaired loan ratio to trend below 2.5% in 2017 after it went up higher at 2.43% last year, compared with 1.88% in 2015, mainly due to classification of certain customer accounts, which are largely related to O&G exposure. Its allowances for impairment on loans and financing also increased to RM595.2 million in 2016 from RM343.5 million a year ago, partly due to higher individual allowances for loan impairment on certain corporate accounts relating to O&G.
O&G loans make up 3.6% of its total loans, which Khairussaleh deemed as manageable.
“We don’t know (whether there will be more impairments this year). We believe that what we’ve done now is sufficient. We’re cautious on that (O&G) segment for new ones (loans) but whatever we have on our books, we’ll put more scrutiny on that particular portfolio,” assured Khairussaleh.
Meanwhile, he dismissed having merger discussions with AMMB again, as talk of a potential merger seems to have resurfaced in the banking industry.
“There’s nothing on merger with any bank. But if an opportunity presents itself and the merits are there, we will consider,” said Khairussaleh.
On loans, RHB is reshaping its portfolio towards more SME and retail loans compared to corporate. It plans to skew its Malaysian portfolio towards 55% retail, 25% corporate and 20% SME in the long term, from 50% retail, 31% corporate and 19% SME previously.
“In terms of rebalancing the portfolio, we can grow a lot more in SMEs, especially the smaller ones and reduce our exposure on corporate to rebalance the overall portfolio.
“We’re optimistic loan growth for SMEs (this year) should be at least as good as last year’s (16%). Loan is one aspect but we’re trying to do more things for the SMEs, such as financial supply chain, e-retail solutions, cash management system, providing the ecosystem for SMEs and making it easier for them to do business. We also plan to do more of this through digital and online capabilities,” said Khairussaleh.
He reiterated RHB’s loan growth target of 5-6% this year, from 2% last year, adding that it is trying to track the industry’s loan growth. He said there will still be growth in consumer loans, driven by its mortgage and auto finance segments.
“We will be selective (on loans), we’re not going to pursue loan growth at the expense of profitability. We’ll be more selective on growing our assets,” said Khairussaleh.