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A MEMBER OF THE TA GROUP
COMPANY UPDATE
Monday, August 04, 2025
FBMKLCI: 1,533.35
Sector: Finance
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
RHB Bank Berhad
RHB Enters Strategic Banca Partnership
New Strategic Alliances Formalised
RHB Bank has entered into a long-term bancassurance partnership with Tokio Marine Life Insurance Malaysia and takaful providers Syarikat Takaful Malaysia Keluarga (STMKB) and its wholly-owned subsidiary, Syarikat Takaful Malaysia Am (STMAB). The collaboration is anchored by separate Distribution Agreements: 1) between RHB Bank and Tokio Marine for conventional life insurance, and 2) between RHB Islamic and Takaful Malaysia for both family and general takaful, alongside a joint Framework Agreement that outlines the operating model and governance structure across all parties.
RHB to Exclusively Distribute Products Developed by Insurers
Under the agreements, RHB will exclusively distribute the full suite of life insurance and takaful products developed by the insurers nationwide via its physical and digital channels. The Distribution Agreements take effect from I August 2025 and will run for 20 years through to 31 July 2045. In return, RHB will receive a Total Access Fee of up to RM1.6bn, which is based on the projected volume of insurance and takaful sales expected over the agreement period. The funds will be used to support the group’s working capital requirements and fuel future growth initiatives.
Positive Earnings Outlook
The Framework Agreement is not expected to affect RHB’s net assets or gearing. However, the Distribution Agreements are likely to contribute positively to group earnings and EPS over time. For now, we retain our earnings projections pending further guidance from management in an upcoming investor briefing.
Partnership a Strategic Fit
Nevertheless, we believe this partnership marks a meaningful step forward in RHB’s efforts to build recurring, non-interest income while deepening customer engagement. Aligning with the group’s PROGRESS27 strategy, the deal could potentially support a more diversified revenue mix and strengthen its insurance distribution capabilities. We also believe that collaborating with experienced and reputable partners such as Tokio Marine and Takaful Malaysia would strengthen product credibility and better enhance RHB’s ability to deliver tailored financial solutions for its customers. In our view, this strategic alliance positions RHB well for sustainable long-term growth.
Valuation and Recommendation
We maintain TP at RM7.52. Our valuation is based on an implied PBV of c. 0.88x based on the Gordon Growth Model and a 3% ESG premium. BUY reiterated on RHB.
(12-Mth) Share Price relative to the FBMKLCI
(Chart data from source: Bloomberg)
Financial Summary (RMmn)
Profit & Loss Statement
| FYE 31 Dec (RMm) | FY23 | FY24 | FY25E | FY26E | FY27E |
|---|---|---|---|---|---|
| Interest income | 9,473 | 10,134 | 10,748 | 11,254 | 11,889 |
| Interest expense | -5,914 | -6,265 | -6,599 | -6,881 | -7,176 |
| Net interest income | 3,560 | 3,869 | 4,149 | 4,372 | 4,713 |
| Islamic banking income | 2,366 | 2,176 | 2,263 | 2,354 | 2,448 |
| Total non-interest income | 1,844 | 2,560 | 2,791 | 3,045 | 3,324 |
| Total income | 7,770 | 8,605 | 9,202 | 9,771 | 10,485 |
| Overhead expenses | -3,689 | -4,021 | -4,263 | -4,518 | -4,790 |
| Operating profit | 4,081 | 4,583 | 4,940 | 5,252 | 5,696 |
| Loan loss provisioning | -302 | -537 | -569 | -604 | -640 |
| Associates contributions | -26 | -26 | -29 | -32 | -35 |
| Profit before tax | 3,753 | 4,020 | 4,342 | 4,617 | 5,021 |
| Taxation and MI | -947 | -900 | -1,046 | -1,113 | -1,210 |
| Net profit | 2,806 | 3,120 | 3,296 | 3,504 | 3,811 |
Balance Sheet Statement
| FYE 31 Dec (RMm) | FY23 | FY24 | FY25E | FY26E | FY27E |
|---|---|---|---|---|---|
| Cash and short-term fund | 14,145 | 11,552 | 11,638 | 10,650 | 11,292 |
| Deposit with Fls | 889 | 811 | 852 | 894 | 939 |
| Marketable securities | 79,910 | 87,648 | 91,428 | 95,380 | 99,510 |
| Total current assets | 94,944 | 100,011 | 103,918 | 106,924 | 111,740 |
| Net loans and advances | 219,563 | 234,968 | 246,756 | 260,335 | 274,649 |
| Fixed assets | 1,066 | 1,018 | 1,018 | 1,018 | 1,018 |
| Intangible assets | 3,467 | 3,488 | 3,488 | 3,488 | 3,488 |
| Other long-term assets | 9,652 | 10,430 | 9,742 | 10,009 | 10,261 |
| Total assets | 328,692 | 349,915 | 364,922 | 381,774 | 401,157 |
| Customer deposits | 245,083 | 249,565 | 259,548 | 269,930 | 280,727 |
| Deposits from other Fls | 17,022 | 27,205 | 28,293 | 29,425 | 30,602 |
| Repurchase securities | 9,478 | 14,671 | 14,671 | 14,671 | 14,671 |
| Bills and acceptances | 810 | 262 | 288 | 317 | 348 |
| Borrowings | 12,657 | 12,577 | 12,577 | 12,577 | 12,577 |
| Other liabilities | 12,730 | 13,103 | 15,505 | 19,136 | 24,609 |
| Total liabilities | 297,781 | 317,383 | 330,882 | 346,056 | 363,535 |
| Total equity + MI | 30,911 | 32,531 | 34,040 | 35,718 | 37,622 |
| Total liabilities + equit | 328,692 | 349,915 | 364,922 | 381,774 | 401,157 |
Sector Recommendation Guideline
- OVERWEIGHT:
- The total return of the sector, as per our coverage universe, exceeds 12%.
- NEUTRAL:
- The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
- UNDERWEIGHT:
- The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
- BUY:
- Total return of the stock exceeds 12%.
- HOLD:
- Total return of the stock is within the range of 7% to 12%.
- SELL:
- Total return of the stock is lower than 7%.
- Not Rated:
- The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Scoring | Environmental ★★★☆☆ |
Social ★★★★☆ |
Governance ★★★★☆ |
Average ★★★★☆ |
|---|---|---|---|---|
| Remark | RHB has adopted a new position on NDPE in addition to adopting the “No Coal” commitment. Moreover, the bank has accelerated the offering of Sustainable Financial Services products and solutions, engaged clients and customers in advocating for the transition to clean energy and green activities, and fostered the incorporation of ESG/sustainable practices into their respective businesses and operations. The company intends to raise RM20bn in sustainable financial services by 2026 and aims to achieve carbon neutrality by 2030 (from RMI Ibn currently). | Achieved an Employee Engagement Score of 90%, on par with the Malaysian financial services industry average. Invested RM24.6mn in the upskilling and reskilling of employees, with a total of 606,623 training hours in 2021. Employees raised more than RM370k for the RHB Humanitarian Fund. At the same time, the group allocated RM800k to the RHB Natural Disaster Fund in 2021 to assist employees who were financially affected by COVID-19 and the floods in December 2021. RHB spent RM689.8mn (91%) to promote local businesses on 523 local suppliers (93%). In 2021, RHB maintained 30% of women’s representation on RHB Bank’s Board of Directors. Women held 53% of Management positions and 28% of Senior Management positions, reflecting diversity and inclusivity within the group. | RHB recently announced the establishment of its Board Sustainability Committee, whose primary role is to assist the Board of Directors in driving the group’s sustainability and climate-related agenda and providing oversight of material ESG matters across the group’s business strategies, operations and decision-making process. RHB Bank’s board composition is fairly well represented, with 63% independent directors. |
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. +3% premium to target price
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. No changes to target price
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. -3% discount to target price
★ (<20%): Minimal or no integration of ESG factors in operations and management. -5% discount to target price
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