KUALA LUMPUR (Feb 4): Phillip Capital expects RHB Bank Bhd (KL:RHBBANK) to lift its dividend payout for the financial year ended Dec 31, 2024 (FY2024), on the back of higher earnings with an improved loan base and one-off gains from its Thai brokerage business disposal.

In a note post-meeting with RHB's management, Phillip Capital projected a final dividend of 27 sen per share in the fourth quarter of FY2024 (4QFY2024), bringing its full-year 2024 payout to 42 sen per share.

This translates to a 60% payout ratio, slightly below the 61% payout recorded for FY2023. Nonetheless, this is higher than the 40 sen per share paid by RHB over the last three years in FY2021-FY2023.

The research house expects a core profit of RM3 billion for FY2024, with net profit growth of 20% seen in the fourth quarter alone to RM704 million. The bank made RM2.81 billion in FY2023.  

RHB is set to release its 4QFY2024 financial results on Feb 27, said the research house, which has a "buy" call of RM7.50 on the stock.

“On non-fund-based income, we anticipate RHB will recognise a one-off gain of RM50 million from the disposal of its Thailand brokerage business, partly offsetting weaker trading-related income,” the research house noted.

"Headline NIM (net interest margin) is expected to close at 1.88% (+6 basis points year-on-year), at the higher end of management’s guidance of 1.82%-1.88%," it said.

Loan growth "will likely increase" in the fourth quarter on both commercial and corporate loans "as the recovery in MGS (Malaysian Government Securities) yields is likely to narrow the cost differential between new bond issuance and borrowing from banks", it said.

That will drive full-year loan growth to above 6%, compared with annualised 4.8% in the first nine months of the year, it said.

At the same time, loan loss provisions are forecasted to decline, leading to a stronger gross impaired loan coverage ratio of 75%, up from 70.6% in 3QFY2024, reflecting improving asset quality and ongoing loan recoveries.

“Operating expenses are expected to be higher quarter-on-quarter in 4QFY2024 due to one-off costs related to the disposal of the Thai brokerage business (RM15 million) and accelerated bonus provisioning,” the research house added.

Even so, RHB’s cost-to-income ratio remains on track at 46%, in line with management’s target, it said.

"We continue to like RHB for its undemanding valuations (0.86 times 2025 price-to-book value estimates with 10% return on equity) and a sector-high dividend yield of around 7%.

"Key risks to our 'buy' call include extended NIM compression, rising cost base, and asset quality deterioration," it said.

At the time of writing, RHB’s share price stood at RM6.44 with a market capitalisation of RM28.08 billion.