Date: September 17, 2024
Broker: Maybank Investment Bank Berhad

Stock Overview

• Current Share Price: MYR 6.30
• Market Capitalization: MYR 27,465 million
• Target Price: MYR 6.80
• Potential Upside: 8%

Valuation Metrics

• Price-to-Earnings Ratio (PER):
  • CY24E: 9.0x
  • CY25E: 8.7x
• Price-to-Book (P/B):
  • CY24E: 0.9x
  • CY25E: 0.8x
• Return on Average Equity (ROAE):
  • CY24E: 9.7%
  • CY25E: 9.8%
• Net Yield:
  • CY24E: 6.3%
  • CY25E: 6.3%

Net Interest Margin (NIM) Recovery

RHB Bank’s NIM is projected to recover in FY24E after facing compression in previous years. The bank’s NIM stood at 1.82% in FY23, and it is expected to recover to a range of 1.88%-1.90% in FY24, with a forecast of 1.89% by Maybank IBG. This improvement reflects the bank’s focus on balancing competitive deposit costs with lending yields.

Liquidity and Funding Position

RHB Bank benefits from improving liquidity conditions within Malaysia’s banking sector. The easing of funding pressures is expected to help maintain or slightly improve NIM, aiding overall profitability. The bank’s robust liquidity coverage ratio (LCR) supports its stable funding costs, which could mitigate the impact of competition in the lending market.

Earnings Growth Potential

RHB Bank has the highest earnings growth potential among its peers, with a forecasted 16.1% increase in net profit if NIMs return to pre-pandemic levels. This could boost the bank’s net profit from MYR 3,222 million to MYR 3,740 million in FY25E. Additionally, the bank’s ROAE is expected to increase from 9.8% to 11.3% over the same period, showcasing strong growth prospects.

Risk and Challenges

RHB Bank, like many other Malaysian banks, faces challenges from intense competition in the deposit and lending markets, which could pressure margins. However, its potential for significant earnings growth through NIM recovery makes it a standout performer in the sector.

This information has been extracted from the Maybank Investment Bank Berhad report dated September 17, 2024.