RHB Bank eyes 9% in return on equity this year

KUALA LUMPUR – RHB Bank Bhd targets to increase its return on equity (ROE) to 9% this year after achieving an ROE of 7.7% in 2020.

Group managing director Datuk Khairussaleh Ramli said the bank believed this would be achievable as it will not be incurring another loan moratorium this year.

RHB Bank's net profit for the financial year ended Dec 31, 2020 (FY20) declined by 18.1%, mainly due to net modification loss arising from the loan moratorium accorded to customers and higher expected credit losses (ECL).

“We are working (towards an ROE) of 9%, and one thing for sure is that we will not have to incur the additional modification losses that we faced last year,” he said during RHB Banking Group's fourth-quarter (Q4) FY20 results announcement, which was held online today.

Khairussaleh added the ECL was expected to remain elevated as the challenge is for the bank to see how fast its customers can recover.

“We think the ECL this year should be lower compared with 2020,” he said, adding that the ECL for FY20 increased by 315.2% year-on-year to RM1.14 billion, after incorporating amounts set aside for potential Covid-19 impact and macroeconomic forward-looking adjustments.

He said the bank’s performance should be better compared with last year with these improvements, hence, contributing to the increase in the ROE for 2021.

RHB Bank's net profit for FY20 slid to RM2.03 billion from RM2.48 billion in FY19 while revenue fell to RM12.59 billion from RM13.52 billion previously.

For the fourth quarter, its net profit fell to RM438.63 million from RM621.01 million posted in the same quarter last year, while revenue slipped to RM3.08 billion from RM3.42 billion in 2019.

Moving forward, Khairussaleh said to address the impact of the pandemic, the group revisited its business plan and reprioritised its five-year programme or FIT22 strategic initiatives.

This would allow the bank to quickly adapt to the changing business environment and shift in customer behaviour brought about by the pandemic, he said.

“Given the challenging operating environment, we will continue to be innovative in our approach, while exercising vigilance by building provisions and enhancing prudent risk management practices,” he added. – Bernama, February 26, 2021