RHB Bank net profit rise in 2023; net credit costs to rise in 2024

Net interest margin is expected to be “flattish” in 2024 at 1.9%.

Malaysia’s RHB Bank saw its net profit increase in 2023, but with profits weakening in the last three months of the year.

The bank reported a net profit of RM2.8b for the whole of 2023, a 4.7% increase compared to a year earlier. However, net profit for the fourth quarter was 23.9% lower, dragged down by higher net credit costs and a lower net interest margin. 

This was partially offset by its non-interest income rising 26% during the quarter, thanks to higher fees commission and foreign exchange income.

Net interest income fell 42 basis points to 1.82% in end-2023 compared to 2.24% in end-2022. For 2024, NIM is expected to be flattish, UOB Kay Hian analyst Keith Wee Teck Keong said. 

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Loan loss coverage (LLC) has dropped further to 72% in Q4, from 75% in Q3. Whilst management is ‘optimistic’ that LLC will improve to around 100% after restructuring specific corporate loans, the current LLC still poses a challenge for RHB to absorb any short-term increase in the gross impaired loans ratio, Wee noted.

RHB expects a loan growth of 4.5% in 2024.

Factoring in higher net credit costs of 25 basis points and 22 basis points for the next two years, Wee trimmed his earnings forecast for RHB Bank by 3% for 2024 and by 2% for 2025.