RHB Bank’s five-year roadmap to strengthen presence in Malaysia
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RHB Bank Bhd, which registered a 16% net profit growth to RM1.95bil for the financial year ended Dec 31, 2017 (FY17), has outlined its strategies in a new five-year plan, FIT22.
The roadmap entails the bank’s priorities to strengthen its presence in Malaysia and win in targeted segments, as well as to focus on its niche and strength in its overseas operations while exploring partnerships.
Speaking at a media briefing held in conjunction with the bank’s FY17 results briefing, RHB group managing director Datuk Khairussaleh Ramli said digital enablement would be a core priority within FIT22, following the conclusion of the IGNITE 17 transformation programme last year.
RHB intends to spend over RM200mil over the next three to five years on digital capabilities and technological investments. “We are now focusing on building scale through an agile way of doing things and believe that we still have room to grow in Malaysia to be able to gain market share and improve profitability,” he said, adding that RHB was now the fourth-largest bank in Malaysia in terms of assets.
The core component of FIT22 will be the small and medium enterprise (SME) and retail segments to drive growth, as well as to build a connected ecosystem.
Khairussaleh said that the retail and SME segments were expected to constitute an estimated 75% of RHB’s domestic loan portfolio from the current 69%, while the affluent customer segment will make up 25% of RHB’s retail business by 2022, from the current 18%.
In addition, RHB aims to boost its return on equity to 11.5%, be the number three bank for SMEs as well as maintain a top-three position for investment banking.
“We are already number one in the mid-cap segment, so if we can build our ecosystem around this segment, some day the mid-caps will grow to become large-caps for us.
“That is something that we think can differentiate ourselves from the other banks as well,” Khairussaleh explained.
“That is something that we think can differentiate ourselves from the other banks as well,”
Todate, RHB has established relationships with some 57% of mid-cap companies, of which one-third have a lending relationship with the bank.
Meanwhile, RHB’s 2018 key performance indicator is to achieve an ROE of between 9% and 10%, a loan growth of 6%, as well as a cost-to-income ratio of below 50%.
On mergers and acquisitions (M&As), Khairussaleh said the bank does not intend to look for any M&As overseas, and will instead focus on expanding its product portfolio across its overseas market.
Noting RHB’s lacklustre performance in Singapore, Khairussaleh said the bank intends to move towards more secured lending and build a new private wealth business in the republic, targeting mid-tier customers with assets under management of S$1mil to S$2mil.
In 2018, the Malaysian banking sector is expected to see a recovery in loan growth, primarily from stronger business loans, while capital market activities are also expected to pick up, which would help support the non-interest income of banks.
RHB’s improved performance in FY17 was largely driven by higher net funding income, lower loan loss impairment and lower impairment losses on other assets.
However, this was partially offset by higher overheads and lower non-fund-based income.
The bank has announced a dividend of 10 sen per share, bringing its total dividend per share for FY17 to 15 sen, representing a 30.8% payout ratio.
Questions & Answers
Q.What is the new five-year plan called and what does it aim to achieve for RHB Bank?
What is the new five-year plan called and what does it aim to achieve for RHB Bank?
The new five-year plan is named FIT22. It aims to strengthen the bank's presence in Malaysia, win in targeted segments, and focus on niche overseas operations while exploring partnerships.
Q.Which customer segments will be the primary focus for driving growth under the FIT22 plan?
Which customer segments will be the primary focus for driving growth under the FIT22 plan?
The core components for driving growth under FIT22 will be the small and medium enterprise (SME) and retail segments. These are expected to constitute 75% of RHB’s domestic loan portfolio by 2022.
Q.What are RHB Bank's specific targets for its return on equity and SME market position by 2022?
What are RHB Bank's specific targets for its return on equity and SME market position by 2022?
RHB aims to boost its return on equity to 11.5% and become the number three bank for SMEs. It also plans to maintain a top-three position for investment banking.
Q.How much does RHB Bank plan to invest in digital capabilities and technology over the next few years?
How much does RHB Bank plan to invest in digital capabilities and technology over the next few years?
RHB Bank intends to spend over RM200mil on digital capabilities and technological investments. This spending will occur over the next three to five years, following the IGNITE 17 programme.
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