KUALA LUMPUR (June 26): RHB Bank Bhd’s (KL:RHBBANK) second-quarter net profit is expected to improve from the preceding quarter, as better lending margins and treasury income offset softer growth in retail loans, according to BIMB Securities.

Credit costs are also expected to remain stable, helped by a possible recovery of an education-sector corporate loan and the reclassification of certain small and medium-sized enterprise (SME) accounts to a lower-risk category.

In a note on Friday, the research house said the bank’s net interest margin, a key measure of lending profitability, could edge higher from the previous quarter as domestic margins remain stable and its Singapore operations improve.

However, the benefit from repricing deposits at lower rates is expected to gradually taper off.

RHB Bank is also expected to benefit from stronger treasury performance during the quarter, supported by a more stable bond market compared with the first quarter.

Loan growth remains on track, led by stronger corporate lending as businesses seek more working capital amid higher input costs, Retail loan growth, however, is expected to moderate.

Some SME loans may also be moved from the credit-impaired Stage 3 category to the lower-risk Stage 2 category, potentially reducing the bank’s provisioning needs.

The bank’s overseas operations could provide another lift, as the weaker ringgit against regional currencies such as the Singapore dollar and Thai baht may increase the translated value of foreign earnings. 

Meanwhile, non-interest income is expected to remain resilient, although bancassurance income could ease from the previous quarter after a larger portion of commissions from RHB Bank’s new bancassurance arrangement was recognised earlier.

BIMB Securities expects RHB Bank’s net profit to improve moderately from the RM857 million recorded in the first quarter.

For the full year, earnings are projected to rise about 6% to RM3.58 billion, while total income is forecast at RM9.35 billion, supported by loan growth of about 6% and a broadly stable net interest margin.

The research house maintained its earnings forecasts and expects full-year cost growth to remain below 5%, supported by operating efficiencies, prudent staff cost management, and savings from renegotiated technology and hardware contracts.

BIMB Securities does not formally rate RHB Bank, but assigned the stock a fair value of RM8.50, based on one time its forecast book value for 2027.

RHB Bank is expected to release its second-quarter results towards the end of August.