KUALA LUMPUR, Dec 1 ― AmInvestment Bank Bhd (AmInvest) has maintained a "buy” call on RHB Bank Bhd with a revised fair value of RM6.90 per share from RM6.80 per share on the back of the bank's better-than-expected earnings and strong income growth.

It said RHB Bank's core net profit for the nine-month financial period to September 30, 2021, rose 15.5 per cent year-on-year (y-o-y) to RM2.15 billion after excluding modification (mod) loss net of tax of RM159 million.

"The nine-month earnings exceeded expectations, making up 83.7 per cent of our and 86.4 per cent of consensus estimates,” AmInvest said in a note.

This was supported by stronger net interest income, partially offset by lower non-interest income, higher operating expenses (opex) and provisions, it said.

AmInvest said for the third quarter (Q3), RHB recorded higher normalised earnings of RM766 million, up by 9.3 per cent quarter-on-quarter (QoQ) after stripping out mod loss related to the National People's Well-Being and Economic Recovery Package (Pemulih) programme net of tax of RM131 million.

The RHB group’s loan also expanded at a faster pace of 6.7 per cent y-o-y in Q3 versus 5.7 per cent y-o-y in the second quarter, supported by mortgages, small and medium enterprises, commercial loans and growth of overseas loans (mainly Singapore).

Domestic loans grew 4.4 per cent y-o-y ahead of the industry’s 2.9 per cent y-o-y, the investment bank noted.

Kenanga Research also maintained "outperform” with a higher target price (TP) of RM6.50 from RM6.10, saying that RHB Bank's normalised profit after tax and minority interest for the first nine months of this financial year was "above estimates” due to stronger top-line and cost performance.

It said the bank's management appeared confident that its financial year 2021 targets would be duly achieved, having gained noticeable ground in its loans mix while still sustaining healthy current account saving account (CASA) levels to keep cost of funds low.

"However, the group is cautious that URUS (Financial Management and Resilience Programme) moratorium may call for bumps in its impairment allowances and hence raise their credit cost guidance to 40-45 basis points (bps) from 40bps.

"For the time being, the group has accumulated management overlays of RM564 million year-to-date which should serve as a solid buffer against any uncertainties that could arise, more recently from new Covid-19 variants,” it added.

Echoing AmInvest and Kenanga, Maybank IB Research also maintained a "buy” stance on RHB Bank but with a lower TP of RM6.00 from RM6.30 previously.

The research house said as the fourth largest domestic financial institution in Malaysia in terms of asset size, any economic slowdown in the country would have a knock-on effect on RHB Bank's operating performance and hence potentially its estimates, rating, and target price.

"Volatility in the oil and gas sector could also result in asset quality issues for both its Malaysia and Singapore loan exposures,” it added.

At midday break, RHB Bank was down one sen to RM5.27, with 1.3 million shares changing hands. ― Bernama