KUALA LUMPUR, Aug 29 — RHB Bank Bhd (RHB) is expecting its loan growth to be around four per cent for financial year 2023 (FY2023), driven by its retail, small and medium enterprises and Singapore segments.

During a briefing on the bank’s first half of 2023 (1H 2023) results, group managing director and group chief executive officer Mohd Rashid Mohamad said earlier on, RHB had projected its loan growth to be around 4.0 to 5.0 per cent for FY2023.

“For 2023, we projected Malaysia’s gross domestic product (GDP) growth to be at 4.3 per cent, while the overnight policy rate is expected to remain accommodative of the banking industry.

“Consumer spending is expected to stay softer in 2H 2023 due to factors such as the rising cost of living that could reduce purchasing power, elevated inflationary pressure and a softer ringgit.

“In short, we believe that the economy will continuously grow but not as strong as in 1H 2023, thus we should be able to meet the loan growth target of four per cent,” he said.

Mohd Rashid said the group’s performance in 1H 2023 reflects the banks’ ability to deliver sustained performance even during uncertain times.

However, he remained cautiously optimistic about the bank’s outlook for the remainder of 2023.

RHB’s net profit for 1H 2023 ended June 30, 2023 rose 29.5 per cent year-on-year (y-o-y) to RM1.57 billion from RM1.21 billion in 1H 2022, while revenue increased to RM7.97 billion from RM5.76 billion previously.

Its net fund-based income slid 10.4 per cent y-o-y to RM2.72 billion on the back of higher funding costs, mainly due to fixed deposit growth and net interest margin (NIM) compression.

Meanwhile, the bank’s non-fund-based income increased 46.3 per cent to RM1.07 billion, primarily due to higher net gain from foreign exchange and derivatives, as well as net trading and investment income.

Mohd Rashid believes that the elevated funding costs and NIM compression will continue in the near term with expected improvement towards the end of the year, while non-fund-based income recovery will be sustained, but volatility in the operating market will linger.

“Persisting cost escalation is from inflationary pressure. Nevertheless, we will continue to maintain cost discipline and invest strategically in information technology and digital to drive efficiencies and improve capabilities.

“We saw the NIM contracting from the first quarter (1Q 2023) to 2Q 2023, but the quantum of the reduction is smaller than what we saw in 1Q 2023, thus I believe that the pressure on the NIM will be slightly less (in 2H 2023) compared to 1H 2023,” he said.

He added that the bank is also looking at various alternatives to manage its funding cost better, including opportunities to raise funding on a long-term basis. — Bernama