RHB's net profit down 28% yoy to US$58m in 4Q16

It took FY16 core earnings to US$420m.

What is positive, according to Maybank Kim Eng, is that RHB continues to gain market share in the SME segment and CASA accumulation has been strong.

"What we look to is a stabilisation in asset quality, especially on the O&G front. Against management’s FY17 ROE target of 9-10%, we estimate 9.6%."

Here's more from Maybank Kim Eng:

Below expectations
RHB’s core net profit of MYR261m (US$58m) in 4Q16 (-28% YoY, -48% QoQ) took FY16 core earnings to MYR1.87b (US$420m) (after stripping out MYR254m Swiber bond provision; +4%YoY).

The results were below expectations with FY16 earnings at 87%/91% of our/consensus forecasts on the back of higher provisions for O&G and steel loans in 4Q16.

Positively, NIM expanded QoQ, CASA composition improved and costs were contained. These positives were negated by a sharp decline in NOII and higher credit costs which jumped to 80bps in 4Q16 from 38bps in 3Q16. LLC was 75% end- 2016, including regulatory reserves.

Forward guidance
Into 2017, management’s KPIs include faster loan growth of 5% versus 2% in 2016, a GIL ratio of <2.5% (2.4% end-2016), CIR below 50% versus 50% in 2016 and improved contributions from overseas operations (10% of group pretax versus -11% in FY16).

Against an ROE of 8.5% in FY16, management targets an ROE of 9- 0% for FY17. Credit costs, meanwhile, are expected to settle lower at 25-30bps in FY17 versus 39bps in FY16.