RHB Bank’s Q1 2025 Performance: Navigating Challenges with Resilient Growth

Greetings, fellow investors! Today, we’re diving into the latest quarterly report from RHB Bank Berhad for the first three months ended 31 March 2025. This report provides a crucial snapshot of the bank’s health and strategic direction amidst a dynamic economic landscape.

What’s the headline? RHB Bank has demonstrated resilient growth, with its net profit showing a commendable increase compared to the previous year. Furthermore, the bank recently announced a significant dividend for the full financial year 2024, signaling its commitment to shareholder returns. Let’s peel back the layers and explore the key highlights from this quarter’s performance.

Core Data Highlights: A Snapshot of Performance

RHB Bank’s financial performance for Q1 2025 showcases a mixed but ultimately positive picture, driven by strategic efforts and improved asset quality. Here’s a breakdown of the key figures:

Overall Financial Performance

The Group’s net profit saw a 2.7% increase, reaching RM750.03 million for Q1 2025, up from RM730.17 million in the same period last year. This growth was primarily fueled by higher net funding income and a significant reduction in credit loss allowances, despite facing headwinds from lower non-fund based income and higher operating expenses.

Similarly, profit before taxation and zakat improved by 5.8% to RM962.67 million, reinforcing the positive trend in profitability.

Basic EPS also saw a slight uptick, rising to 17.20 sen from 17.03 sen, reflecting the improved net profit.

Revenue and Expense Dynamics

Net fund-based income increased by 7.3% year-on-year to RM1,486.7 million, a positive indicator of the bank’s core lending activities. This was supported by a robust 6.3% year-on-year growth in gross loans and financing, which reached RM239.2 billion, driven by expansion in mortgage, corporate, commercial, and auto finance segments.

However, non-fund based income experienced a decline of 20.2% to RM560.9 million. This was mainly due to lower net trading and investment income, reduced net gain on foreign exchange and derivatives, and a decrease in income from the insurance business. Operating expenses also saw a modest increase of 1.2% to RM970.7 million, leading to a higher cost-to-income ratio of 47.4% compared to 45.9% a year ago.

Asset Quality and Financial Health

A significant positive development was the sharp 50.8% reduction in net allowance for credit losses, which stood at RM105.79 million, primarily due to lower credit losses on loans and financing.

The Group’s gross impaired loans ratio improved significantly to 1.50% as at 31 March 2025, down from 1.83% a year ago, indicating better asset quality and risk management.

Balance Sheet Strength

Total assets grew by 0.7% from December 2024 to RM352.54 billion. Customer deposits also increased by 2.3% year-on-year to RM248.5 billion, although CASA (Current Account Savings Account) composition slightly decreased to 28.0%.

Net assets per share stood at RM7.39, with shareholders’ equity at RM32.2 billion as at 31 March 2025, showing a slight decrease from the end of FY2024.

Segmental Performance Breakdown

The report also sheds light on the performance of RHB’s key operating segments:

The diversified performance across segments highlights the varied impacts of the operating environment on different business lines.

Risk and Prospect Analysis: Looking Ahead

RHB Bank acknowledges a challenging operating environment ahead, emphasizing the need for vigilance to address potential risks while capitalizing on opportunities. The bank remains steadfast in executing its “PROGRESS27” three-year strategy, which aims for leadership in service excellence, profitability, and attentiveness to customer needs.

Macroeconomic uncertainties loom, with Malaysia’s GDP expected to moderate in 2025. This moderation is attributed to heightened global headwinds, including the impact of US reciprocal tariffs on trading partners, which could lead to a slowdown in economic activity in the second half of the year. Sectors like electronics and electrical, crude materials, and machinery could be directly impacted by these tariff tensions.

Despite these challenges, the banking sector is projected to maintain strong capital and liquidity positions. The Overnight Policy Rate (OPR) stance will continue to be influenced by inflationary pressures and the broader economic impact of global trade dynamics.

The bank’s robust capital adequacy ratios (CET I Capital Ratio at 15.959% and Total Capital Ratio at 18.500% before proposed dividends) provide a strong buffer against potential economic volatility, underpinning its ability to navigate these uncertainties.

What are your thoughts on RHB Bank’s Q1 2025 performance? Do you believe their “PROGRESS27” strategy will effectively mitigate the anticipated macroeconomic headwinds? Share your insights and perspectives in the comments below!