PETALING JAYA: RHB Bank Bhd appears to be well positioned to handle a potential interest rate hike in the future.

This is due to the Group’s high mix of adjustable rate loans, which currently accounts for 87% of the total loan book.

“This is indicative of the group’s strong ability to reassess funding due to the eventual rate hike that we expect to take effect in the second half of 2022,” said Kenanga Research.

The research house, which recently held a meeting with the bank’s management, said RHB Bank hopes to see its loan books grow 4% to 5% this fiscal year (FY), up from 6.7% in FY21 , aided by the economic recovery.

The bank expects mortgages and hire purchases to lead credit growth, but also noted that small and medium-sized business performance in certain sectors such as hospitality and tourism is still flagging, although they could regain strength as borders reopen .

“The Singapore segment, which consists of approximately 25% loan growth in FY21, is expected to perform strongly after reopening earlier than expected, but perhaps at a more moderate pace going forward,” it said.

Management had also noted that repayment assistance accounts for about 6% of outstanding loans.

The group is also still hopeful about its bid for the digital banking license.

Management has proposed some key executions should it eventually secure a digital banking license with its partner in Axiata Digital or Boost.

“For now, the funding will likely come in parallel with their respective 40:60 stakes in the joint venture, with the aim of reaching RM3bil’s asset ceiling in the digital bank’s start-up phase,” it said.

It noted that the group will primarily target underserved communities with non-traditional products such as microcredit to spur economic development and transition these customers to more sophisticated banking products as they mature.

Meanwhile, RHB Bank has accumulated 21 management overlays of RM819 million as a preliminary buffer at the end of the fiscal year.

“Despite favorable rallies, management is reluctant to unwind reserves early and may choose to refresh its allocation as uncertainties persist,” Kenanga Research said.

The research house had maintained its “outperform” statement with a target price of RM6.95

“While the record FY22 dividend payout of about 60% is unlikely to be repeated, the group’s historical average of 50% still offers investors a modest 5% to 6% yield,” Kenanga Research said.