KUALA LUMPUR (Aug 28): RHB Bank Bhd reported a net profit of RM400.77 million for the second quarter ended June 30, 2020 (2QFY20), down 34.9% from RM615.41 million a year ago, mainly due to a one-off net modification loss of RM392.39 million from the loan moratorium granted to customers, and higher allowances for credit losses on loans.

Group revenue slipped 4.4% year-on-year (y-o-y) to RM3.27 billion from RM3.42 billion. No dividend was declared for the quarter.

Compared to 1QFY20, the bank's net profit was down 29.8% from RM570.88 million, while revenue saw a 1.2% improvement from RM3.23 billion.

Excluding the modification loss, RHB said its normalised pre-tax profit for the quarter was at RM906.6 million, 20.5% higher than 1QFY20's RM752.3 million, mainly due to higher non-fund-based income. This was partially offset by higher impairment on loans and financing, lower net interest and fund-based income, a higher impairment loss from an associate and higher operating expenses.

For the cumulative six months ended June 30, 2020 (6MFY20), the bank's net profit was at RM971.65 million, down 22.3% y-o-y from RM1.25 billion, while revenue retreated 4% to RM6.5 billion from RM6.77 billion. The earnings drag came mainly from the modification loss and a higher allowance for credit losses of RM359 million — versus RM168.2 million a year ago — as it took steps to absorb potential negative effects on asset quality from the pandemic outbreak.

The impact of the modification loss, meanwhile, came primarily from hire purchase and personal financing portfolios, RHB said. "Higher net fund-based income and non-fund-based income, coupled with lower operating expenses, helped mitigate the profit reduction," the bank said.

Net fund-based income grew 3.5% y-o-y to RM2.5 billion, driven by proactive management of funding costs, which dropped 14% y-o-y, supported by an increase in current account savings account (CASA) composition from 26.6% to 28.6%, and the redemption of hybrid Tier-1 capital and certain sub-debt instruments during the period, RHB said.

The net interest margin (NIM) for the quarter dropped to 2.05% from 2.09% a year ago. "Non-fund-based income improved by 9.8% to RM1,211.9 million, contributed largely by higher net trading and investment income, brokerage income and an insurance underwriting surplus," it added.

RHB group managing director Datuk Khairussaleh Ramli said the group’s healthy liquidity position and strong capital base will help it cushion the adverse impact caused by the pandemic.

"The group has taken a prudent stance of not declaring any interim dividend but will revisit this at year end, when there is better visibility of the impact and outlook. We will remain watchful in the second half of 2020 while we focus on ensuring business continuity for our customers by offering them assistance and support during these trying times," he said.

While the outlook remains challenging as the extent of the impact of the pandemic remains uncertain, Khairussaleh said the group is confident it will be able to navigate through the unprecedented economic challenges presented.

At the time of writing today, RHB shares were trading one sen or 0.21% higher at RM4.69, giving it a market capitalisation of RM18.81 billion.

Edited by Tan Choe Choe

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