AmInvest Research retains buy on RHB Bank, FV RM6.80

In its research note on Wednesday, the research house continued to peg the stock to FY22 price-to book value (P/BV) of 0.9 times, supported by a return on equity (ROE) of 10.0%.

AmInvest Research said RHB Bank organised a virtual meeting to provide updates on the progress for its digital transformation programme which has been in place since 2017.

The group allocated RM200mil for digital investments from 2018 to 2022 and RM300mil for IT modernisation including cloud adoption in 2019–2022.

These were intended to: i) increase digital transactions to 80.0%; ii) achieve a target of 50.0% in business originations from digital channels; iii) 15.0% revenue from digital ecosystem partnerships; and iv) attain an improved CI ratio of 45.0%.

Thus far, the group has spent 65.0% or RM130mil of the allocation for digital investments. These were mainly on digital channel platforms (DCP), resources (talents) and other digital assets, which included the consultation and development fees for apps.

“Meanwhile, on investments allocated for IT modernisation, the group has spent 48.0% or RM144mil of the total amount budgeted,” it said.

AmInvest said RHB Banking group has seen positive results from its digital transformation journey.

Digital transactions YTD until August 2021 have risen significantly to 93.5% (including ATM) and 85.0% (excluding ATM) compared to 64.2% and 45.9% respectively in FY17. In the terms of businesses originated digitally, these have has climbed to 25.0% for FY21 YTD vs. 0.6% in FY17.

In 3Q21, the group‘s digitally active customers continued to rise to 28.0% (FY20: 26.0%). With improved productivity and lower cost for customer acquisitions, the group’s cost-to-income ratio has steadily trended lower to 45.0% in 1H21 vs. 50.0% in FY17.

“We see room for further lowering of its CI ratio in the medium to longer term with the potential optimisation of branches as well as through higher employee productivity with more processes automated and increased availability of products and services digitally,” AmInvest Research said.