RHB Bank targets 5% loan growth this year

KUALA LUMPUR: RHB Bank Bhd, which saw a 28.1% drop in net earnings for the fourth quarter (Q4) of 2016, is targeting 5% loan growth this year, slightly higher than the 2% increase it registered last year. 
“From our point of view, what we went through last year was probably the worst, as we were impacted by the oil and gas segment,” its group managing director Datuk Khairussaleh Ramli told reporters at the bank’s results briefing here last Friday.
“This year, with the improved oil price, in terms of loan growth we think that we can grow at about the industry level. With that, we expect return on equity (ROE) to grow between 9% and 10% this year,” he added, noting the industry loans are expected to grow 5.3% this year.
Khairussaleh said the group’s gross loans increased 2% year-on-year to RM154.5 billion in 2016, driven by mortgage growth at 13.3% and lending to small and medium enterprises loans and financing growth at 11.3%. 
He added that the bank’s loans portfolios rebalancing strategies have shown good progress, with corporate loans portfolios reduced to 29% last year, from 31% in 2015 and 33% in 2014.
Previously, Khairussaleh said, corporate loans tended to be one-off with smaller margins, and it is better that they are reduced to 25% by 2020.
Meanwhile, he said Islamic banking continued its growth momentum last year, contributing almost 25% of its total domestic loans and financing, higher than 23% in 2015. As at Dec 31, 2016, RHB’s domestic loan market share stood at 9%.
Commenting on its performance in FY17, Khairussaleh said the group expects it to be better than last year, despite its moderate growth outlook for the Malaysian banking sector this year. 
For the fourth quarter ended Dec 31, 2016 (Q4FY16), the bank’s net profit fell 28.1% to RM261.24 million, from RM363.37 million in the previous corresponding quarter, due mainly to higher impairment on loans and financing, lower non-fund-based income and higher operating expenses.
Revenue declined 9.25% to RM2.56 billion, from RM2.82 billion in the same period last year. 
Khairussaleh noted that the bank’s gross impaired loans ratio grew 2.43% last year, compared with 1.88% in FY15, as its asset quality was impacted by certain corporate loan accounts in oil and gas and pre-emptive provisions for legacy steel-related exposure. 
He added that total impairment losses on other assets were higher at RM268.2 million, due mainly to the full impairment made for a corporate bond in Singapore.
However, Khairussaleh said the bank’s net interest margin improved by three basis points to 2.18% in the quarter under review due to prudent funding cost management. 
For FY16, its net profit was up by 1% to RM1.68 billion, from RM1.66 billion a year ago, while revenue went down slightly by 1.9% to RM10.57 billion, from RM10.78 billion previously.
Its operating profit before allowances grew 21.6% to RM3.1 billion, underpinned by healthy net fund-based income growth as well as effective cost management initiatives. 
RHB has proposed final dividend of 7 sen per share totalling RM280.7 million for FY16. The final dividend represents a dividend payout ratio of 28.6% out of its net profit for the year.