RHB's asset quality stable in Q1

Gross impaired loans ratio slipped to 2.39%.

According to Maybank Kim Eng, having deteriorated in 4Q16, RHB’s asset quality was stable in 1Q17 with absolute impaired loans declining a marginal 2% QoQ. RHB’s gross impaired loans ratio slipped to 2.39% end-Mar 2017 from 2.43% end-Dec 2016. The group saw an uptick in its working capital impaired loans, which has been attributed to one particular Singapore-based construction loan.

Here's more from Maybank Kim Eng:

The group’s exposure to the O&G sector declined marginally to 3.4% of total loans end-Mar 2017 from 3.6% end-Dec 2016. The loan loss coverage on its O&G portfolio currently stands at 43%.

RHB’s charge off rate was just 35bps in 1Q17 versus 79bps in 4Q16 (21bps in 1Q16). Management had earlier guided for lower credit costs of about 25-30bps in 2017, versus an average of 39bps in 2016. Taking a more conservative stance, management now guides for credit costs of <35bps, which would still be within
our imputed cost of 30bps for FY17.

Loan loss coverage remained low at just 60% end-Mar 2017 versus 56.5% end-Dec 2016, 77.5% if we include regulatory reserves.