KUALA LUMPUR: RHB Capital Bhd (RHBCap), the country’s fourth-largest lender by assets, which is in the midst of a merger with CIMB Group Holdings Bhd and Malaysia Building Society Bhd to become the biggest, reported a 3% fall in third quarter net profit on higher bad loan allowance and operating expenses.

This comes despite the group registering higher net interest income and net Islamic banking earnings during the quarter.

RHBCap’s net profit for the third quarter ended September of financial year 2014 (3QFY14) fell to RM544.61 million from RM559.15 million a year ago. Revenue, however, rose to RM2.72 billion from RM2.46 billion.

Its income statement showed that bad loan allowance for 3QFY14 climbed to RM94.22 million from RM29.87 million a year ago. Operating expenses were higher at RM840.88 million against RM764.01 million in 3QFY13.

For the nine-month period (9MFY14), RHBCap’s net profit rose to RM1.55 billion from RM1.33 billion a year ago. Revenue was higher at RM7.58 billion compared with RM7.06 billion.

For 9MFY14, RHB reported loan growth of 11.7% to RM136 billion from a year earlier, while customer deposits rose 7.5% to RM148.1 billion.

Impaired loans ratio improved to 2.29% from 2.81% in December 2013, according to the group.

Looking ahead, RHBCap expects the group’s FY14 performance will be better than FY13 after taking into account the domestic banking sector’s growth trend.

“The Malaysian banking sector will continue its growth trend for the rest of the year, supported by broadly resilient private investments and the various economic programmes driving SME business growth, although this may be partially offset by some moderation in the household segment,” it said.

This article first appeared in The Edge Financial Daily, on November 21, 2014.