KUALA LUMPUR (Aug 28): RHB Bank Bhd does not foresee another cut in the overnight policy rate (OPR) by Bank Negara Malaysia (BNM) in the near term, as it expects the Malaysian economy to bounce back, based on an increase in the number of loan applications it has received across its business segments.
RHB group managing director Datuk Khairussaleh Ramli said taking note of the bank’s gross domestic product (GDP) growth forecast of -4% for the year, there is no reason to reduce the OPR.
“Our house call is that, while GDP will contract in the third quarter, it will contract at a much smaller rate. We also expect there will be some positive GDP growth in the fourth quarter, even though it may be small.
“We do see improvements in certain segments of our business in terms of applications coming in, which we believe can be attributed to incentives given by the government relating to homeownership as well as the purchase of vehicles,” he said during a press conference on the group’s quarterly results.
While the number of loan applications by small and medium enterprises (SMEs) was still below the pre-Covid-19 period, it had since rebounded from the lows seen in April and May, said Khairussaleh.
“We are seeing some green shoots in the segments that we support and with the GDP forecast that we have, we think there is perhaps no reason to reduce the OPR for now,” he said.
Year to date (YTD), the retail segment has seen a 0.5% growth in gross loans to RM90.56 billion, with mortgages making up more than half of the figure at RM60.34 billion.
Under the business banking segment, SME loans have increased by 5.2% since the start of the year to RM20.9 billion. In total, RHB has seen gross loans and financing increase by 2.6% YTD and 4.9% year-on-year (y-o-y) to RM180.75 billion.
Due to the six-month moratorium, which is scheduled to end on Sept 30, RHB recorded a modification loss of RM392.4 million, which resulted in a 5.7% y-o-y decrease in its total income for the first half ended June 30, 2020 (1HFY20).
“Excluding the net modification loss, total income grew 5.5%, supported by growth in both net fund-based and non-fund-based income,” said Khairussaleh.
The modification loss, coupled with higher allowances for expected credit losses (ECLs) which included the potential impact of Covid-19, resulted in a 22% y-o-y decline in its net profit to RM971.7 million.
In view of the ending of the moratorium in about a month, Khairussaleh said the bank had mobilised a “credit war room” to ensure effective customer engagements and adequate deployment of resources.
He said the bank will provide targeted payment assistance to customers facing difficulties in paying their instalments post the moratorium, with the bank intensifying efforts to reach out to customers through various channels.
As of Wednesday, the bank had extended assistance to more than 7,000 accounts, amounting to approximately RM1 billion, under its retail banking business.
On a different matter, Khairussaleh said RHB had disbursed RM910 million to more than 1,300 SME clients under the Special Relief Facility (SRF) and approved more than RM300 million under the BizPower Relief Fund, which is an alternative to the SRF.
The bank has also allocated RM50 million each for both the Penjana (National Economic Recovery Plan) SME Financing Scheme and the Penjana Tourism Financing Scheme.
The bank has reached out to almost all of its business banking clients in high-risk sectors and developed a payment assistance programme particularly for the hotel sector. The bank is currently in the midst of expanding assistance to other sectors, said Khairussaleh.
It has also reached out to more than 50% of its corporate banking customers and identified those who may require payment assistance.
“The economic impact of the Covid-19 pandemic continues to be felt by businesses and individuals alike — globally and domestically. The gradual and phased reopening of various sectors of the economy in a controlled and orderly manner will enable Malaysia to recover at a faster pace,” Khairussaleh said, adding that industry loans are expected to grow by 3.5% in 2020 as recovery momentum picks up.
At 4pm today, RHB’s share price was unchanged at RM4.68, giving it a market capitalisation of RM18.77 billion.
Edited by S Kanaraju