The Star Online: Business
The Star Online: Business |
| RHB plans to be a wholesome bank Posted: 11 Jan 2013 06:42 PM PST TWO words: My bank. That's how Tan Sri Azlan Zainol would like RHB Bank Bhd the organisation in which he has been the chairman for the past seven years to be seen by its customers. Indeed, it is every banker's dream to be the first choice of service providers for customers. It's not surprising therefore that Azlan is thinking of positioning RHB Bank as such. "When people look for banks, RHB should be the first choice that comes into their minds," Azlan tells StarBizWeek in an interview in conjunction with the bank's 100-year anniversary this year. "The key for us (to achieve that) is to find a niche," he says, pointing to "Easy by RHB" as one of the most important initiatives that the bank has launched in recent years towards this end. RHB Bank is one of the key subsidiaries of Main Market-listed RHB Capital Bhd (RHB Cap). It contributes about 80% of the group's pre-tax profit annually. The banking group will reach a significant milestone come July this year, when RHB Bank is officially 100 years old. "I presume that we are the oldest bank in Malaysia," Azlan says, noting that there are not many companies in the country that have reached this milestone. "We're proud of the fact that we're 100 years old, and that we've done well throughout all these years," he says. Lots of programmes are in store, according to Azlan, for the banking group's customers, stakeholders and staff, as it will celebrate in a "reasonably big way". The organisation, he says, will also focus a little more on charity as part of its celebration. Rich history The RHB Banking group boasts a rich history that traces the development of the country's banking and financial services industry from pre-independence days to the most turbulent economic times in the region's history. Its important celebration this year is also taking place amid the changing landscape of the industry that has already seen a spate of mergers and acquisitions (M&As) in the past couple of years, both at home and in the region. The RHB Banking group, which assumed its current name only in 1997, is itself no stranger to M&As. It came about through a merger between Kwong Yik Bank Bhd and DCB Bank Bhd (formerly known as the Development and Commercial Bank Bhd) in 1997. That year saw bumiputra entrepreneur Tan Sri Abdul Rashid Hussain emerge as the group's executive chairman. The bank's current initials come from his name. Kwong Yik Bank was founded by a Chinese community led by Wong Loke Yew, or better known as Loke Yew in July 1913, while DCB Bank was established in 1966 by then finance minister Tun Sir Henry H.S. Lee. In the aftermath of the 1997/98 Asian financial crisis, the troubled Sime Bank Bhd (formerly known as UMBC Bank) was merged into the RHB Banking group in 1999. Four years later, when Kuching-based Bank Utama Bhd, the banking arm of Cahya Mata Sarawak Bhd, became the latest bank to be merged into the RHB Banking group, Rashid made his exit from the group. Today, the controlling shareholder of the RHB Banking group is the Employees Provident Fund (EPF), which owns a 41% stake in RHB Cap. (Azlan is also the CEO of EPF at present and holds directorship in RHB Cap.) "As a major shareholder in the RHB Banking group, we (EPF) will continue to make sure that the group grows in a healthy way," he stresses. Going international According to Azlan, the immediate challenge for the group is to try and grow its business outside Malaysia. "We are still hopeful of the deal with PT Bank Mestika Dharma (Bank Mestika) in Indonesia as part of our plan to grow our presence outside Malaysia," he says. RHB Banking group's initial plan was to acquire an 80% stake in Bank Mestika for RM1.16bil. But recent regulatory changes in Indonesia, which put a limit on foreign shareholding, means the group cannot own more than a 40% stake in Bank Mestika. "We will play by the rules. If the rules now say foreign ownership would be limited to 40%, we will take the 40%," Azlan says. In November last year, RHB Bank and Bank Mestika had mutually extended the period for the completion of the conditional sale and purchase agreement to Jan 31, 2013. According to Azlan, the RHB Banking group will still be able to drive the operations of Bank Mestika with its local partner once it completes the proposed acquisition in the latter, which could be by June this year. The immediate priority in Indonesia upon completion of the deal is to increase RHB group's network and presence in Sumatra, and all the other key economic areas that the Indonesian government intends to develop. According to media reports, the Indonesian government has identified at least five special economic zones to boost growth. These include Mandalika in central Lombok, West Nusa Tenggara, and Bitung in North Sulawesi; Sei Mangke in Simalungun, North Sumatra; and Tanjung Lesung in Pandeglang, Banten. On its regional expansion plans, Azlan further says: "We want to concentrate on South-East Asia first, and then, South China." The group already has an office in Hong Kong and China, and is looking at expanding further in the Indochina region, encompassing Vietnam and Laos. The group is also eyeing possible opportunities in the Philippines and Myanmar. "Our target is to grow our overseas contributions from the current 5% of total revenue to 30% of total revenue by 2017," Azlan says. He says the recent acquisition of OSK Investment Bank (OSKIB) has boosted the group's presence outside Malaysia. "There are plenty of synergies gained from the exercise. A boost to our overseas presence is one. The "people factor" is another this is a merger of talented people," he says, adding that the focus is to ensure that the group's growth could be accelerated from now on. Investment banking currently contributes only about 3% of RHB Cap's group pre-tax profit. "We expect to see huge growth for the group now because OSKIB is in," Azlan points out. RHB Cap raked in a net profit of RM1.4bil, or 62.1 sen per share, for the first nine months of 2012. This represented an increase of 8.8% from the corresponding period a year ago. The group's revenue for the period in review, on the other hand, rose 7.6% year-on-year to RM3.5bil. Pre-tax profit for that period in 2012 stood at RM1.8bil, of which RM1.7bil came from RHB Bank. Annualised return on equity (ROE) and return on assets stood at 14% and 1.1%, respectively. "I think we can improve our profitability I don't see why our ROE cannot go to 20% within a short period of time," Azlan says. The RHB Banking group has already outlined several strategies to grow its business and improve its bottom line. According to Azlan, these strategies include boosting loan growth to enhance interest income, expanding the group's transaction banking and treasury businesses as well as enhancing other areas that could boost its fee income. But to Azlan, what's most important is not just about keeping the business growing and making profits. "I want to build a wholesome bank it is not just about profits and making money, but it is also about our responsibility to society, our duty to develop talent within the management of RHB group, and making our customers happy," he explains of his longer-term vision for RHB Banking group. |
| Posted: 11 Jan 2013 06:40 PM PST ALLIANCE Research was one of the first to flag RHB Capital Bhd (RHB Cap) as its top pick for the domestic banking sector last year despite uncertainties around the group's merger with OSK Investment Bank (OSKIB). Citing several catalysts, including the completion of the acquisition, the research house's banking analyst Cheah King Yoong said at the time that RHB Cap's low valuations were "no longer justified" and it was poised to go from a "market laggard to a market leader, with its shares outperforming many of its banking peers". With the merger now signed and sealed, Cheah says he still holds this view. "We believe investors have been overly conservative on the potential synergistic benefits to be derived from RHB Cap's acquisition of OSKIB," he explains to StarBizWeek. Indeed, if there is one thing that stands out in discussions about the company, it is that RHB Cap is one of the cheapest banking stocks around. But this, depending on whether you see the glass as half full or half empty, could either mean it is trading at attractive valuations or that the market is discounting it for a good reason. RHB Cap is currently valued at a price-to-book of 1.2 times and price-to-earnings of 9.8 times for its financial year 2013. In comparison, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd command a price-to-book of 1.8 times and 1.9 times and price-to-earnings of 12.5 times and 11.9 times, respectively. Among the second-tier banks, Hong Leong Bank trades at a forward price-to-book of 2.1 times and price-to-earnings of 14.4 times, and Public Bank at 2.9 times and 13.4 times, according to Bloomberg data. Analysts say RHB Cap shares have underperformed despite solid earnings report cards so far in the first three quarters of its financial year ended Dec 31, 2012. Its nine-month results had exceeded expectations, with net profit rising 14.4% to RM487.48mil from RM426.22mil in the previous year, accounting for 81.4% of full-year estimates. Revenue was up 10.6% to RM1.96bil from RM1.77bil. This was on the back of higher net interest income and lower loan loss provisions. Its gross loans grew at a impressive pace of 12.6%, on an annualised basis, to RM106.6bil, beating the industry average of 11.2%, while deposits expanded 11.3% to RM125.7bil. Its loan-to-deposit ratio ticked up to 84.8% at end-September. The firm's annualised return on equity stood at 15%, although this may undershoot management's 14% target for 2012 by a small margin because of the enlarged share base. RHB Cap shares gained 5.2% last year, while Maybank saw its stock rise 10.3%, CIMB 5.4%, Hong Leong 37.4%, and Public Bank 23.7%. The sceptics opine that the merger with OSKIB was skewed in favour of the latter's shareholders, a move that will dilute earnings and water down its return on equity for at least the next few quarters. RHB Cap had in November issued 245 million new shares, or 10% of its enlarged share base, at RM7.36 each, which formed the bulk of its settlement with OSK Holdings Bhd. The cash portion was RM147.5mil, giving the entire purchase a price tag of RM1.95bil. OSK Holdings will remain a listed entity. The acquisition valued OSKIB at 1.77 times price-to-book and 18.9 times historical price-to-earnings, and saw OSK Holdings emerge as RHB Cap's third-largest shareholder behind Abu Dhabi's Aabar Investments PJSC and the Employees Provident Fund (EPF). OSK Holdings will also get a board seat each on RHB Cap, RHB Bank and RHB Investment Bank. In addition, Maybank IB Research thinks RHB Cap shares could be reflecting a potential merger with Malaysia Building Society Bhd (MBSB). "This possibility cannot be ruled out," it notes in a report. StarBiz had previously reported that MBSB could be privatised and merged with RHB Bank as both are majority-owned by the EPF. To Alliance's Cheah, the negativity around RHB Cap can only mean there is plenty of upside. He also deems the anticipated acquisition of a stake in Indonesia's PT Bank Mestika Dharma would be a strategic move for the group to entrench its position in the lucrative Indonesian market. "Although the market is concerned that RHB Cap may overpay for Bank Mestika, we believe it will be priced reasonably," he says, pointing out that the unlisted Bank Mestika's product range is currently underutilised. RHB Cap had originally proposed to buy 80% of Bank Mestika in 2009 for RM1.16bil, but regulatory changes by Indonesia's central bank to limit foreign ownership to 40% had delayed its plans. RHB Bank and Bank Mestika now have until Jan 31 to ink the conditional sale and purchase agreement. "RHB Cap remains committed to securing a presence in Indonesia and is willing to take the first 40% stake pending further discussions with regulators," HwangDBS Vickers Research explains in a client note recently. Maybank IB Research also points out that the halving of its purchase effectively shrinks any rights issue that could be carried out to fund it. Meanwhile, it is up in the air as to whether RHB Cap will benefit from any merger and acquisition (M&A) play this year. In 2011 it was pursued by both Maybank and CIMB, a deal that was scuppered when Aabar Investments paid RM10.80 per share or 2.25 times book value for a 25% block in RHB Cap from its sister company Abu Dhabi Commercial Bank. Still, a market watcher contends that Aabar Investments could yet pare down its shares if market talk is to be believed. Of more immediate focus is how the consolidation between RHB Cap and OSK IB will pan out. Already, industry observers say the usual teething problems are making their presence felt while management maintains that attrition has been minimal. The market will also be waiting to scrutinise the synergies that are to be extracted from the merger, which RHB Cap has quantified at RM324mil over the next three years, most of which is expected to be recognised in the third year. The opportunities from cross-selling, a stronger IB presence and expanded retail and commercial offerings could wring in some RM275mil, cost savings and network alignment RM34mil and lower cost of credit RM15mil. Integration costs are estimated at RM86mil. And in light of the slower loan growth forecast this year of between 10%-11% versus 11%-12% in 2012, Alliance's Cheah believes the key near-term earnings driver for RHB Cap will be non-interest income, such as fees from the disbursement of Economic Transformation Programme-related bonds and the continued robust capital markets. |
| American Express cuts 5,400 jobs Posted: 11 Jan 2013 06:32 PM PST Saturday January 12, 2013WASHINGTON: American Express said it would lay off 8.5% of its workforce in 2013, in an effort to contain operating expenses and adapt to customers moving to online and mobile platforms. The bank said it would eliminate 5,400 jobs, though some of those would be offset by new positions, for a net cut of 4%-6% of the 63,500-strong workforce. – AFP |
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