KUALA LUMPUR, March 14 (Bernama) -- The FTSE Bursa Malaysia KLCI (FBM KLCI) ended the week slightly higher, in line with regional indices despite the weaker performance on Wall Street overnight. At 5 pm, the FBM KLCI rose 2.12 points or 0.14 per cent to 1,512.15 from Thursday’s close of 1,510.03. The market bellwether opened 10.08 points lower at 1,499.95, and moved between 1,493.29 and 1,516.25 throughout the day. On the broader market, gainers outpaced losers with 680 to 292, while 437 counters were unchanged, 1,009 untraded, and 13 suspended. Turnover was marginally lower at 3.24 billion units worth RM2.5 billion from 3.25 billion units worth RM2.90 billion on Thursday.
RHB Bank Bhd has unveiled its ambitious three-year strategy, PROGRESS27, which promises to enhance profitability, service quality, and sustainability from FY25 to FY27. While some of these targets appear to be on the higher end, analysts remain optimistic about the bank's ability to achieve them.
Key Targets in PROGRESS27:
- Return on Equity (ROE): Aiming for over 12%.
- Cost-to-Income Ratio: Targeted below 44.8%.
- Domestic Loan Growth: Aiming for 7% annual growth.
- Fee-Based Income Growth: Projected to grow by 10% annually.
Despite these ambitious targets, analysts from CIMB Securities and MIDF Research have expressed confidence, largely due to RHB's strong financial performance and current trajectory. CIMB has raised its target price for RHB to RM8.20 from RM7.50, while MIDF maintains its target at RM7.40.
Strategic Focus:
RHB’s PROGRESS27 strategy is focusing on higher-yielding segments such as:
- Auto finance
- Small and medium enterprises (SMEs)
- Mid-sized loans
The bank is also making efforts to boost fee-based income and cross-sell products, which could help it reach its goals despite potential market headwinds.
Driving Efficiency and Growth:
To streamline operations, RHB plans to cut RM500 million in costs over the next three years, while leveraging digitalisation to improve operational efficiency. Moreover, the bank is aiming to expand its Current Account Savings Account (CASA) deposits, setting a goal of achieving a 30% domestic CASA ratio by FY27.
Challenges Ahead:
While RHB’s plans look promising, analysts point out that much of its success will depend on market conditions. Specifically, achieving 7% loan growth and 10% fee-based income growth annually will require a favorable economic environment. Analysts are also cautious about the broader financial market’s performance, which could impact RHB’s targets.
Positive Outlook:
Despite these challenges, CIMB Securities has raised its earnings forecast for RHB, expecting a 4.3% increase for FY25 and 5.2% for FY26, based on stronger loan growth and an improved CASA deposit accumulation.
RHB’s Net Interest Margin (NIM) is forecasted to reach 1.90% by FY27, which analysts believe is a conservative estimate, given the bank’s focus on higher-yielding segments. Additionally, RHB plans to achieve RM90 billion in sustainable financing by FY27, underlining its commitment to responsible banking.
Investor Confidence:
With a 60% dividend payout, RHB may even increase its payouts if it hits its strategic targets, potentially boosting shareholder returns. Analysts remain confident in the bank’s growth trajectory, supported by PROGRESS27’s clear and structured roadmap, as well as RHB’s successful execution of past strategies.
While RHB's targets may seem ambitious, the bank's track record and the details of PROGRESS27 leave analysts optimistic about its future prospects, making RHB a top pick in the banking sector.
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