RHB Capital Berhad posts first quarter net profit of RM357.2 million
Kuala Lumpur, 29 May 2013
RHB Capital Berhad ("the Group") today reported a net profit of RM357.2 million for the first quarter ended 31 March 2013, 18.0% lower from RM435.6 million recorded a year ago. Pre-tax profit was at RM494.3 million, 14.9% lower than the corresponding period in 2012. The year-on-year earnings decline was mainly due to a one-off delinquent account impairment as well as higher collective allowance due partially to loan growth.
Year-on-year revenue increased by 18.5% to RM1.4 billion, driven by the full consolidation of OSK Investment Bank Berhad ("OSK Investment Bank") and top line gains in net interest income and income from Islamic Banking business.
Net interest income rose 9.9% to RM778.9 million, reflecting the effect of consolidation of OSK Investment Bank and higher average lending and deposit balances on a business as usual basis as the Group continues in growing its priority segments. Net interest margin remained relatively stable at 2.34%.
Other operating income recorded a strong growth of 36.2% to RM450.1 million yearon- year. This increase was boosted by robust fee income mainly in brokerage, wealth management and fund management, higher card fees and net foreign exchange gain. This was however partially negated by lower capital market-related income during the first quarter of the year and lower net trading income and investment related gains.
The combined RHB Investment Bank Berhad ("RHB Investment Bank") - OSK Investment Bank franchise and capability has started to bear fruit as evidenced in the higher non-interest income to total income ratio of 33.0% during the quarter under review from 28.7% previously.
Islamic Banking income increased by 20.4% to RM133.7 million, driven mainly by higher net funding income on the back of a 28.1% increase in financing base from a year ago.
Other operating expenses rose 38.1% year-on-year mainly due to the full-period impact of OSK Investment Bank cost base and higher headcount, as well as higher sales commissions and incentive compensation linked to a stronger business volume from wealth management and fund management business segment. Included in other operating expenses during this quarter was also integration related expenses of RM7.7 million. Cost to income ratio was at 52.7%.
Allowance for impairment on loans and financing during the quarter to 31 March 2013 increased to RM154.9 million from RM45.4 million recorded a year ago. This increase was primarily the result of a one-off delinquent account impairment allowance and higher collective allowance for the strong loan growth. Notwithstanding the negative bearing on the earnings for this quarter, income from the new loans is expected to flow through over time to more than offset the overall impact of collective allowance.
Total assets for the Group were marginally lower at RM184.6 billion as at 31 March 2013. Shareholders' equity strengthened to RM15.5 billion with net assets per share improving to RM6.22 against RM6.06 as at 31 December 2012.
The Group's gross loans registered a 1.9% growth during the quarter and an 18.9% growth year-on-year to reach RM113.5 billion, mainly from purchase of securities, working capital and purchase of residential properties. Domestic loans market share stood at 9.5% as at 31 March 2013.
Total CASA (Current and Savings Accounts) recorded a 2.2% growth, highlighting the efforts of the Group's liability management strategy whilst CASA mix improved to 22.3% from 21.3% in December 2012.
Liquidity position of the Group remained healthy with loans to deposits ratio stood at 84.0% compared to 80.6% as at 31 December 2012.
Gross impaired loans ratio declined to 2.95% from 2.99% in December 2012.
"Pipeline deals are healthy and we expect to see more mandates being executed going forward. Loan pipelines are similarly encouraging with broad base loan applications and approvals increased by 40.0% and 34.7% respectively year-onyear," said Kellee Kam, Group Managing Director of RHB Banking Group.
"The corporate and business banking performance is expected to pick up pace in the second quarter and improve in tandem with the domestic economic environment and a healthier capital market for the rest of the year. This coupled with the strong overall fundamentals of our businesses, will place us well to deal with the challenges ahead and to take advantage of our strengthened domestic and regional franchise to realise our set targets for the year," added Kellee Kam.
Performance Review of Key Subsidiaries
For the first quarter ended 31 March 2013, RHB Bank Berhad ("RHB Bank") recorded a pre-tax profit of RM417.3 million, 17.3% lower from that achieved a year ago, largely attributable to higher allowance for loan impairment.
RHB Bank remained well capitalised with common equity Tier-1 and Tier-1 capital ratio of 10.85% and 11.47% respectively, while its total capital ratio stood at 14.42% as at 31 March 2013.
RHB Islamic Bank Berhad achieved a pre-tax profit of RM53.0 million for the first three months of 2013, significantly lower than the profit for the previous year corresponding period of RM100.7 million. This was mainly attributable to a net writeback of loan loss provision of RM15.1 million recorded in the previous year compared to a net allowance for loan impairment this quarter of RM9.1 million, absence of unrealised gain on derivatives for hedging totaling RM12.9 million and higher other operating expenses by RM9.0 million.
RHB Investment Bank recorded a pre-tax profit of RM2.0 million and OSK Investment Bank achieved a pre-tax profit of RM32.4 million during the quarter under review.
On a proforma basis, the combined RHB Investment Bank and OSK Investment Bank Group recorded a pre-tax profit of RM53.8 million for the first quarter ended 31 March 2013 compared to RHB Investment Bank stand alone pre-tax profit of RM31.4 million in the first quarter of 2012. This was largely due to higher fee income, net interest income and net foreign exchange gain, partially negated by higher other operating expenses. The two organisations have successfully completed Legal Day One on 13 April 2013.
The combined assets under management of RHB Investment Management Berhad - OSK-UOB Investment Management Berhad stood at RM31.5 billion, accounting for 10.0% of the domestic market share as at 31 March 2013.
Prospects for The Year
The Malaysian economy is expected to perform well in 2013 with Gross Domestic Product (GDP) projected to grow by over 5.0%. This is premised on an improving exports outlook on the back of a stronger global growth and a strong domestic demand brought about by the Economic Transformation Programme (ETP).
The Malaysian banking sector will remain resilient in line with the country's economic growth.
"The integration of RHB-OSK Investment Bank on 13 April 2013 has enhanced the Group's geographical footprint and capabilities with presence in seven countries across the Asean region and Hong Kong.
We remained focus to drive our targeted business segments and regions to becoming a leading multinational financial services group. Barring any unforeseen circumstances, the Group expects satisfactory results for the financial year 2013," said Kellee Kam.
This release contains forward-looking statements such as the outlook for the RHB Banking Group. Although RHB believes that the expectations reflected in such future statements are reasonable at this time, there can be no assurance that such expectations will prove correct subsequently. Actual performance may be materially different from that which had been anticipated or described herein, and RHB Capital's financial and business plans may be subject to change from time to time.
A leader in financial services, the RHB Banking Group (Bursa Malaysia: RHBCAP) offers innovation and experience in investment & commercial banking and insurance services & products. The RHB Banking Group has earned numerous awards by industry observers and editors. Today, its managers and staff serve customers via a network of over 500 branches and outlets in Malaysia, Brunei, Thailand, Singapore, Indonesia, Cambodia, Vietnam, Hong Kong and China.
About the RHB Banking Group
The RHB Banking Group is the fourth largest fully integrated financial services group in Malaysia. The Group's core businesses are streamlined into seven Strategic Business Groups ("SBGs"): Retail Banking, Business Banking, Group Transaction Banking, Corporate & Investment Banking, Islamic Banking, Global Financial Banking and Group Treasury. These businesses are offered through its main subsidiaries - RHB Bank Berhad, RHB Investment Bank Berhad, RHB Insurance Berhad and RHB Islamic Bank Berhad, while its asset management and unit trust businesses are undertaken by RHB Investment Management Berhad and OSK-UOB Investment Management Berhad. The Group's regional presence now spans eight countries including Brunei, Cambodia, Indonesia, Hong Kong, Malaysia, Singapore, Thailand and Vietnam. It is RHB Banking Group's aspiration to deliver superior customer experience and shareholder value; and to be recognised as a Leading Multinational Financial Services Group.
Significant Corporate Developments