Friday, May 24

Loan business key growth to RHB Cap’s strong 4Q results

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KUCHING: RHB Capital Bhd’s (RHB Cap) RM1, 420 million profit in its financial year 2010 (FY10) was driven by strong operating performance, with its lending business playing a major part as loans were poised to grow above the industry benchmark.

Kenanga Investment Bank Bhd (Kenanga Research) stated that RHB Cap’s fourth quarter for FY10 (4QFY10) operating numbers were strong, with gross loans growing at 20.2 per cent year-on-year (y-o-y) driven by price cutting strategy that saw lower net interest income of 2.74 per cent.

Besides that, the group’s cost was well-controlled with a sustained cost-to-income ratio of 40 per cent and a better credit charge-off rate of 50 basis points.

The research firm disclosed that RHB Cap’s net interest income was flat despite loans grew at five per cent quarter-on-quarter.

“This was mainly due to lower net interest margin of 15 basis points. The group, however, continues to gain loan market share across targeted segments, which were mortgages, hire purchase and ASB loans,” added Kenanga Research.

In a separate report, OSK Research Sdn Bhd (OSK Research) highlighted that the key growth drivers for the group’s loans were residential
properties, non-residential properties, government-linked loans and purchase of ASB loans from the group’s EASY outlets.

Amidst the double-digit growth rate of loans, the group had planned to increase its EASY outlets to 240 by end of this year from a current 120.

This new delivery channel had been expanding in good shape that saw productivity rising by six to seven times higher than the traditional branch network. It noted that EASY outlets had contributed 17 per cent of newly acquired retail loans in FY10.

Furthermore, its major shareholder, the Employees’ Provident Fund (EPF), had set plan to reduce its stake to 40 per cent from 48.4 per cent currently by the middle of the year.

The reduction, viewed Kenanga Research, would improve the group’s liquidity and lead to improve valuations.

Kenanga Research thus pegged RHB Cap at a target price of RM9 per share while OSK Research pegged at RM9.56 per share.