KUCHING: RHB Bank Bhd (RHB Bank) posted lower earnings and turnover for the fourth quarter of 2016 (4Q16) ended December 2016.
RHB Bank Group’s managing director Datuk Khairussaleh Ramli said, “We saw a 8.4 per cent (excluding CTS cost) increase in operating profit before allowances, resulting from prudent funding cost management and lower overhead costs.
“We are pleased to note our business banking and retail banking businesses registered profit growth and our efforts to grow CASA have also borne fruits.
“The challenging operating environment has affected our net profit.
“Nevertheless, our balance sheet remains strong, as capital and liquidity are at comfortable levels, which will put us in a good position to drive value creation especially from key businesses and segments and grow with our customers, as we continue to manage asset quality and focus on operational efficiency” he commented.
Besides that, he also expects the group’s financial performance for the financial year 2017 to be better than the previous financial year.
The banking group in a filing to Bursa Malaysia yesterday said 4Q16 earnings decreased by 28 per cent year-on-year (y-o-y) to RM261.24 million from RM363.37 million recorded in 4Q15.
At the same time, RHB Bank said 4Q16 revenue declined by 9.3 per cent y-o-y to RM2.56 billion from RM2.82 billion generated in 4Q15.
For financial year 2016 (FY16) ended December 2016, RHB Bank said revenue fell marginally by 1.9 per cent to RM10.57 billion from RM10.77 billion in FY15.
In spite of that, the banking group said FY16 net profit improved by one per cent to RM1.7 billion from RM1.66 billion recorded in FY15.
Meanwhile, RHB Bank in a statement said the group’s operating profit before allowances for FY16 grew 21.6 per cent to RM3.09 billion due to reduced funding cost following the rights issue that was completed in April 2016, healthy growth in current account, savings account (CASA), as well as the reduction in personnel cost arising from the career transition scheme (CTS).
The banking group explained that excluding CTS, its operating profit before allowances grew by 8.4 per cent.
Additionally, RHB said included in the 2016 financial results was an impairment on a corporate bond in Singapore of RM253.5 million in the second quarter of 2016.
Comparatively, in 2015, RHB Bank observed the group incurred CTS expenses of RM308.8 million and benefited from collective allowances written back due to model refinement on mortgage portfolio amounting to RM131.4 million.
It noted excluding the effects of those items, normalised net profit increased by 4.2 per cent y-o-y.
Apart from that, RHB Bank said the group’s total income increased to RM6.19 billion, supported by net fund-based income growth of 3.1 per cent to RM4.32 billion, on the back of a two per cent growth in loans and financing, offset by a decline in non-fund based income by 5.6 per cent.
The banking group pointed out that its banking operation’s net interest margin improved by three basis points to 2.18 per cent in 4Q16 due to prudent funding cost management.
Nonetheless, RHB Bank noted its non-fund based income was down by 5.6 per cent at RM1.87 billion, contributed largely by lower investment banking and securities market related fee income in line with volatility in capital and financial markets as well as lower net foreign exchange gain.
Despite that, the banking group said the lacklustre performance for the non-fund based income was partially offset by higher insurance underwriting surplus and an increase in asset management fee income y-o-y.
Interestingly, RHB Bank stressed that the group’s effective cost management continued to deliver positive results and yielded productivity gains.
It noted, excluding the CTS cost last year, normalised operating expenses were lower by 6.7 per cent from FY15.
Moreover, RHB Bank observed the decline in expenses was attributed to headcount cost savings, partly offset by higher information technology (IT) related expenses as the group continued to invest in technology capabilities and infrastructure.
The banking group said its cost to income ratio improved to 50 per cent as compared with 53.8 per cent (normalised excluding CTS expenses) in FY15.
Furthermore, RHB Bank said the group’s allowances for impairment on loans and financing increased to RM595.2 million from RM343.5 million a year ago due to higher individual allowances for loan impairment on certain corporate accounts relating to oil and gas, and pre-emptive provisions for legacy steel related exposure, coupled with the absence of a one-off collective allowance written back due to model refinement on mortgage portfolio in 2015.
As a result, the banking group noted its gross impaired loans ratio was higher at 2.43 per cent from 1.88 per cent as at December 31, 2015.
Overall, RHB Bank said the group’s total impairment losses on other assets were higher at RM268.2 million due to the full impairment made for a corporate bond in Singapore.
Commenting on the outlook of the economy as well as the banking industry in Malaysia, RHB Bank opined that the Malaysian banking sector growth is expected to be modest, with slower corporate loans growth and ongoing consolidation of household loans.