Higher non-fund-based income and lower expected credit loss drive RHB Bank’s robust growth in the first quarter of 2023.
TWC – RHB Bank Bhd has announced a remarkable 31% increase in net profit for the first quarter ended March 31, 2023 (1QFY2023), soaring to RM761.67 million compared to RM582.33 million in the same period last year. This surge in profitability can be attributed to the bank’s higher non-fund-based income and lower expected credit loss.
According to the filing with Bursa Malaysia on Friday (May 26), RHB Bank witnessed a rise in earnings per share from 14.06 sen to 17.93 sen. Additionally, the bank’s revenue expanded by 39.57% to reach RM3.92 billion, up from RM2.81 billion in 1QFY2022.
RHB Bank attributed its impressive performance to a 39.7% increase in non-fund-based income, amounting to RM534 million. This surge was mainly driven by a higher net gain on foreign exchange and derivatives and higher net trading and investment income.
The bank’s allowance for credit losses decreased by 70.1% to RM46 million, reflecting lower expected credit losses on loans and a net writeback for expected credit losses on securities. RHB Bank reported an annualized credit charge ratio of 0.1% for 1QFY2023, a significant improvement compared to the 0.29% recorded the previous year.
On the other hand, RHB Bank experienced a 6.6% decline in net fund-based income for 1QFY2023, totaling RM1.37 billion, primarily due to higher funding expenses. The bank attributed the rise in funding costs to a 9.9% year-on-year growth in fixed deposits.
The group reported a net interest margin (NIM) of 1.9% for the quarter, compared to 2.16% in the year’s corresponding period. Operating expenses 1QFY2023 increased by 3.1% from the previous year to RM856.5 million, primarily driven by the higher establishment, marketing, administration, and general costs. The cost-to-income ratio remained relatively stable at 44.9%, compared to 44.8% in the previous year.
RHB Bank’s total assets increased by 0.5% to RM312.4 billion as of March 31, 2023, from December 2022. The net assets per share stood at RM7.04, with shareholders’ equity amounting to RM29.9 billion.
Maintaining its strong capital position, RHB Bank revealed that its Common Equity Tier-1 (CET-1) and total capital ratio stood at 16.9% and 19.7%, respectively.
Gross loans and financing for RHB Bank grew by 6% year-on-year to reach RM213.4 billion, supported by growth in the mortgage, auto finance, small and medium-sized enterprises, and the Singapore market. Domestic loans and financing experienced a 4.7% year-on-year growth.
Customer deposits remained stable at RM226.4 billion, with a slight decrease of 2.9% in current and savings account (Casa) balances, offset by a growth of 1.2% in fixed deposits and money market time deposits. The Casa composition accounted for 28.1% of total deposits, while the liquidity coverage ratio remained 147.3% as of end-March.
The bank reported gross impaired loans of RM3.4 billion as of March 31, 2023, with a gross poor loans ratio of 1.59%, compared to RM3 billion and 1.5% in the same period in 2021. The loan loss coverage ratio for the group, excluding regulatory reserves, remained strong at 109.4% as of end-March.
Mohd Rashid Mohamad, RHB Bank’s group managing director and chief executive officer, stated that the group remains committed to fortifying its balance sheet while maintaining robust capital and liquidity positions. He emphasized that RHB Bank is on track to achieve its sustainability goals, with a cumulative achievement of over RM14 billion in sustainable financial services, equivalent to 73% of the group’s 2026 target of RM20 billion.
At noon on Friday, RHB Bank’s share price settled slightly lower at RM5.45, representing a decrease of 0.18% and valuing the group at RM23.36 billion.