This article first appeared in The Edge Malaysia Weekly on April 4, 2022 - April 10, 2022

IN a widely expected move, RHB Bank Bhd last week appointed Mohd Rashid Mohamad as its new group managing director cum CEO, effective April 1.

Outside of a small circle within Corporate Malaysia, not many know of the 54-year-old banker now tasked with leading the country’s fourth largest banking group by assets into its next phase of growth.

He has largely stayed in the background in his eight-plus years with the group, first as its treasurer and then as the head of group wholesale banking, a role he took up only in July last year. He was named officer-in-charge and principal officer on Jan 24 this year when it was announced that his predecessor, Datuk Khairussaleh Ramli, would be taking a leave of absence. Khairussaleh will be joining Malayan Banking Bhd as its president and CEO on May 1.

With RHB Bank’s five-year strategic road map — known as FIT22 — coming to an end this year, all eyes are on Mohd Rashid to see what he comes out with for the group’s next five-year plan.

Many in the industry are keen to see if Mohd Rashid, described as “a nice guy” by those who know him, will be able to shake the group out of its “cruise” mode to become a more progressive entity.

As it stands, analysts that The Edge spoke do not expect him to deviate too far from the current strategy, under which there is a strong focus on growing the small-to-medium-enterprise (SME) segment, building on its niche and strengths overseas —particularly in Singapore — and digital transformation.

Recall that under his predecessor’s FIT22 strategy, RHB Bank had shelved an earlier ambition to become a banking powerhouse in Asean and, instead, decided to focus its growth efforts in Malaysia.

Analysts believe RHB Bank’s new five-year strategy under Mohd Rashid will likely be unveiled later this year or early next year.

“He is unlikely to rock the boat,” says Hong Leong Investment Bank Research banking analyst Chan Jit Hoong. “The new strategy isn’t likely to change that much, but there will likely be an even stronger focus on digital initiatives and on SMEs. They’ve already done quite a bit on digital, especially in the retail banking space with, for example, the rollout of a mortgage app and a refresh of the mobile banking app.”

Indeed, apart from RHB Bank’s own efforts on the digital front, a joint venture between the bank and Boost Holdings Sdn Bhd last June to undertake digital banking in Malaysia will also very much be in focus — if it clinches the required operating licence from Bank Negara Malaysia.

The central bank is expected to reveal any day now the successful recipients of up to five digital banking licences, and many see RHB-Boost as a frontrunner for one. RHB Bank would have a 40% stake in the digital bank, with Boost — the fintech unit of Axiata Group Bhd — holding the remainder.

Another analyst wonders if Mohd Rashid might include regional expansion as part of its upcoming strategy. “RHB is not in Indonesia, so maybe it’s something he may consider. Singapore is doing well for them,” the analyst points out.

Unlike its larger rivals Malayan Banking Bhd and CIMB Group Holdings Bhd, RHB Bank does not have commercial banking operations in Indonesia. It only has an investment banking presence there.

Given that it is a mid-sized lender and owned substantially by the Employees Provident Fund, RHB Bank is often viewed as a likely candidate in any potential banking merger. EPF has a 42.17% stake, while OSK Holdings Bhd holds 10.18%.

Many are wondering if this might happen under Mohd Rashid’s watch.

Industry sources note that rumours have been circulating about a potential revisit of an RHB-AMMB Holdings Bhd merger now that AMMB banking stalwart Tan Sri Azman Hashim has retired from the group as at March 31. However, it remains to be seen if this will actually happen.

To be sure, Mohd Rashid takes over a stronger RHB Bank from Khairussaleh. As at end-2021, it had one of the strongest CET-1 ratios  (17.2%) in the industry and was able to pay out much-stronger-than-expected dividends. Its total dividend per share stood at 40 sen last year, representing a payout ratio of 63% versus its four-year average of 38%.

Its net profit that year grew 28.8% to RM2.62 billion, even higher than its pre-Covid-19 earnings of RM2.48 billion in FY2019.

Nevertheless, some concerns remain, including asset quality on the corporate side. The group’s gross impaired loan (GIL) ratio, an indicator of asset quality, deteriorated to 1.49% as at end-2021 from 1.32% a quarter earlier, due to several corporate accounts, notably within the oil and gas sector. Year on year, though, the GIL ratio was an improvement from 1.71% before.

Some analysts also cite loan growth as a potential concern. “They did well in FY2021 and grew loans 6.7% y-o-y but only marked a 4%-5% growth target for this year. This could be a bit worrying for investors, especially since we’re looking at a recovery phase,” says Kenanga Research banking analyst Clement Chua.

“But I think the bank is in good hands (under Mohd Rashid). His wholesale banking background means he has a lot of experience dealing with the larger, chunkier accounts,” he adds.

Bloomberg data shows that most analysts tracking RHB Bank have a “buy” on it, with the 12-month average target price at RM6.66. The bank’s share price gained 11.5% over the last 12 months to close at RM5.99 on April 1, giving it a market capitalisation of RM24.82 billion.

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