RHB Bank a laggard among banks, set to trend higher ?

RHB Bank Bhd looks poised to continue its uptrend in share price after falling from a high of RM6.83 in late Nov. Investors are probably positive on the banking group’s strong 3QFY24 results.

3QFY24's core net profit (CNP) of RM833m increased by 15% quarter-on-quarter.It was driven by robust net income growth, up 3.9%qoq, coupled with controlled OPEX increase and lower provisions.

Gross loans contracted by 0.2%qoq,coming up to 2.3%YTD. The lower quarter-on-quarter gross loans contraction was due to forex impact from strengthening Ringgit. Translation impact amounted to RM3 billion.

RHB Bank reported net earnings of RM833 Million in 3QFY24, up 28% YoY and RM2.29b in9MFY24 (+3% YoY). The bank is on track to meet the full-year consensus estimate of RM2.99b for FY Dec 2024, with further growth projected to RM3.18b for FY Dec 2025. Based on a book value per share of RM7.28 as of end-Sep 2024, the stock is trading at a price/book value multiple of 0.90x.

RHB Bank’s share price has recorded positive monthly returns in Dec in 11 of the past 15 years. If this historical trend continues, the stock could rise above the end-Nov’s closing price of RM6.76 by 31 Dec this year.

Analysts are encouraged by the improving trend in credit charge-offs for 2024. 3Q24 charge- offs of RM100 million was significantly lower than the 1Q24 high of RM213 million.

Asset quality is improving despite an uptick in GILs for mortgages and overseas business (Thailand and Cambodia). Management remains focused on recoveries and restructured and rescheduled (R&R) efforts, particularly in Thailand.

On the other hand, loan growth remains healthy (+4% YoY), with better momentum expected in 4Q24. Deposit growth was slightly muted at 1% YoY as RHB optimizes FD to rebalance the deposit portfolio.

Analysts are raising their target price for RHB Bank to around RM7.50. They like RHB Bank for its undemanding valuations (0.92x 2025E P/BV with 10% ROE) and a sector-high dividend yield of 6%.