FINANCIAL SERVICES
(RHBBANK MK EQUITY, RHBC.KL)
06 Aug 2025
RHB BANK: New Bancassurance Deal Expected to Boost RHB’s NOII
kelvin-ong@ambankgroup.com
DL: 2036 2294
| Key Changes | |
|---|---|
| Fair value | ⇔ |
| EPS | ⇧ |
| YE to Dec | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|
| Total income (RM mil) | 8,604.9 | 8,927.6 | 9,369.3 | 9,975.4 |
| Core net profit (RM mil) | 3,120.2 | 3,188.3 | 3,372.7 | 3,773.1 |
| FD Core EPS (sen) | 72.0 | 73.6 | 77.8 | 87.1 |
| FD Core EPS growth (%) | 9.6 | 2.2 | 5.8 | 11.9 |
| Consensus Net Profit (RM mil) | 3,206.0 | 3,361.0 | 3,608.0 | |
| DPS (sen) | 43.0 | 44.2 | 46.7 | 52.3 |
| BV/share (RM) | 7.50 | 7.81 | 8.43 | 8.96 |
| PE (x) | 8.6 | 8.4 | 8.0 | 7.1 |
| Div yield (%) | 6.9 | 7.1 | 7.5 | 8.4 |
| P/BV (x) | 0.8 | 0.8 | 0.7 | 0.7 |
| ROE (%) | 9.8 | 9.6 | 9.6 | 10.0 |
Investment Highlights
RHB’s new 20-year bancassurance and bankatakaful partnerships with Tokio Marine Life and Syarikat Takaful Malaysia are expected to enhance non-interest income (NOII), supporting its PROGRESS27 strategy. These long-term agreements provide stable fee income with potential upside if pre-agreed performance targets are met. Insurers will pay up to RM1.615 billion in access fees—RM1.3 billion amortised over 20 years, and RM315 million payable in year four, contingent on RHB meeting three-year targets. While the impact on FY25F earnings is modest, FY26F could see a meaningful uplift, potentially adding up to RM163 million or 5% of FY26F net profit.
- Recommendation and valuation. We reaffirm our BUY call on RHB with an unchanged target price of RM7.58/share, based on FY26 P/BV of 0.9x, supported by a 9.6% ROE and a neutral 3-star ESG rating. FY25-27 earnings forecasts have been slightly raised by 0.2%-1.2%, reflecting higher NOII from the gradual amortisation of access fees under the new bancassurance and bankatakaful partnerships with Tokio Marine Life and Syarikat Takaful Malaysia.
- The newly established bancassurance partnership agreements with Tokio Marine Life and Syarikat Takaful Malaysia are expected to boost the group’s NOII. On August 1, 2025, RHB entered a new 20-year (1st Aug 2025 to 31st July 2045) strategic bancassurance and bankatakaful partnerships with Tokio Marine Life and Syarikat Takaful Malaysia Keluarga (STMKB), including Syarikat Takaful Malaysia Am Berhad (STMAB). RHB will distribute Tokio Marine’s life insurance and STMKB/STMAB’s family and general takaful products via branches and digital channels, supporting its PROGRESS27 strategy to grow NOII and domestic loans. To align interests, a unified banca collective agreement was signed, with insurers collaborating to ensure smooth operations through shared platforms and streamlined processes.
- These long-term agreements ensure steady fee income. Under the agreement, insurers will pay up to RM1.615 billion in access fees over 20 years, supporting RHB’s NOII. RM1.3 billion will be amortised gradually, while the remaining RM315 million is a lump sum payable in year four, subject to RHB meeting a three-year performance target.
- FY25F earnings impact is modest but could rise meaningfully in FY26F if three-year performance targets under the agreements are met. For FY25F, the estimated pro-rated earnings contribution is RM15.3 million (≈0.5% of earnings) after RM11.7 million in related expenses. In FY26F, upfront access fee amortisation could contribute around RM50 million post-tax. If auditors confirm RHB is on track to meet targets, the RM315 million performance-based fees may be progressively recognised over three years, potentially adding up to RM163 million (≈5% of FY26F net profit) in a full year.
| Price performance | 3mth | 6mth | 12mth |
|---|---|---|---|
| Absolute (%) | (7.9) | (3.9) | 10.3 |
| Relative (%) | (7.8) | (1.6) | 10.2 |
Company profile
RHB Bank is a multinational financial institution that delivers a wide range of financial services, including community banking, wholesale banking, international business, Islamic banking, and insurance. The group maintains a regional presence across Singapore, Thailand, Brunei, Cambodia, Indonesia and Laos.
Investment thesis and Key catalysts
We find the valuation appealing, with the stock trading at 0.7x FY26F price-to-book value (P/BV), supported by a projected return on equity (ROE) of 9.6%.
Valuation methodology
The stock valuation is based on FY26 estimates, applying a price-to-book value (P/BV) multiple of 0.9x derived from the Gordon Growth Model. This assessment is underpinned by a cost of equity (COE) of 10.3%, a beta of 1.1, a market risk premium of 6.5%, a risk-free rate of 3.5%, and a long-term growth rate of 3%.
Risk factors
Potential downside risks to our projections include:
- Slower-than-expected global economic expansion, which may negatively affect loan growth.
- An unforeseen rise in funding costs—particularly if CASA growth lags, leading to intensified competition for deposits.
- Prolonged high interest rates in developed markets, which could reduce the valuation of bond and securities portfolios, consequently impacting banks’ non-interest income (NOII).
EXHIBIT 1: VALUATIONS
| COE | 10.3% |
| Beta | 1.1 |
| Market risk premium | 6.5% (from 6.3%) |
| Risk free rate | 3.5% (from 3.7%) |
| Long term growth rate | 3% |
| P/BV | 0.9x |
| FY26 BVPS | RM8.43 |
| TP | RM7.58 |
| ESG Premium | 0 |
| Adjusted TP | RM7.58 |
EXHIBIT 2: CHANGE IN EARNINGS
| RMm | Previous | Revised | Chg | Previous | Revised | Chg | Previous | Revised | Chg |
|---|---|---|---|---|---|---|---|---|---|
| FY25F | FY26F | FY27F | |||||||
| Earnings | 3,182.0 | 3,188.3 | 0.2% | 3,347.6 | 3,372.7 | 0.7% | 3,728.4 | 3,773.1 | 1.2% |
| Non-interest income | 2,613.2 | 2,628.5 | 0.6% | 2,667.9 | 2,728.5 | 2.3% | 2,723.7 | 2,830.6 | 3.9% |
EXHIBIT 3: ESG SCORE
| Environmental assessment | |||||
| Parameters | Weightage | Rating | Rationale | ||
|---|---|---|---|---|---|
| 1 | Exposure to sustainable financing out of total loans | % of loan book | 30% | * * * * | RM17.8bil sustainable finance mobilized (more than target of RM10.2bil) vs. RM2.1bil in FY23 |
| 2 | % of financing to high risk ESG sectors out of total loans | % of loan book | 30% | * * * | |
| 3 | Scope 1 GHG Emissions to total income | t/Co2e/RM’Mil | 10% | * * * * | Low at 0.05 in FY24 vs. 0.06 in FY23 |
| 4 | Scope 2 GHG Emissions to total income | t/Co2e/RM’Mil | 10% | * * * * | Lower at 2.6 in FY24 vs 3.1 in FY23 |
| 5 | Scope 3 GHG Emissions to total income | t/Co2e/RM’Mil | 10% | * * * * | Stable at 0.3 in FY24 |
| 6 | Electricity consumption to total income | Electricity consumption to total income | 5% | * * * | |
| 7 | Water consumption to total income | m3/RM’Mil | 5% | * * * | |
| Weighted score for environmental assessment | 100% | * * * * | |||
| Social assessment | |||||
| Parameters | Weightage | Rating | Rationale | ||
| 1 | Corporate Social Responsibility investments or spend | % of total income | 35% | * * * * | More than RM4.99mil in FY23 vs. RM3.93mil in FY22 |
| 2 | Investments in training | % of total income | 20% | * * * * | 0.4% in FY24 and FY23 |
| 3 | Workforce diversity – women in senior management and above (excluding Board Directors) | % of total workforce | 10% | * * * | 35.3% in FY24 vs. 33.9% in FY23 and 30.3% in FY22 |
| 4 | Average training hours per employee | hours | 25% | * * * * | 29 hrs in 2024 vs. 22 hrs in 2023 and 18hrs in 2022 |
| 5 | Financial literacy programs | No of participants educated through programs | 10% | * * * | 10,034 individuals in FY24 lower than 15,141 in FY23 |
| Weighted score for social assessment | 100% | * * * | |||
| Governance assessment | |||||
| Parameters | Weightage | Rating | Rationale | ||
| 1 | Board age diversity | % under the 61 to 70 years old category | 20% | * | 90% 61-year-old and above |
| 2 | Board women representation | % of total board directors | 10% | * * * | 30% |
| 3 | Directors with tenure of 3-6 years | % in the 3 to 6 years or more category | 20% | * * | 30% >5 years |
| 4 | Independent board directors | % of total board directors | 20% | * * * * | 60% independent directors |
| 5 | Remuneration to directors | % of total operating expenses | 10% | * * * | |
| 6 | Cybersecurity, Privacy and Data Protection | Confirmed incidents | 20% | * * * * | 7 complaints on breaches of customer privacy and loss of data in FY24 similar to FY23 |
| Weighted score for governance assessment | 100% | * * * | |||
| Environmental score | 40% | * * * * |
| Social score | 25% | * * * |
| Governance score | 35% | * * * |
| Overall ESG Score | 100% | * * * |
Source: AmInvestment Bank, Company
EXHIBIT 4: FINANCIAL DATA
| Income Statement (RMmil, YE 31 Dec) | |||||
|---|---|---|---|---|---|
| FY23 | FY24 | FY25F | FY26F | FY27F | |
| Net interest income | 3,559.6 | 3,869.3 | 4,067.6 | 4,352.4 | 4,798.0 |
| Non-interest income | 1,844.4 | 2,559.6 | 2,628.5 | 2,728.5 | 2,830.6 |
| Islamic banking income | 2,366.4 | 2,176.0 | 2,231.5 | 2,288.5 | 2,346.9 |
| Total income | 7,770.4 | 8,604.9 | 8,927.6 | 9,369.3 | 9,975.4 |
| Overhead expenses | (3,689.3) | (4,021.4) | (4,106.7) | (4,263.0) | (4,489.0) |
| Pre-provision profit | 4,081.1 | 4,583.5 | 4,820.9 | 5,106.3 | 5,486.5 |
| Loan loss provisions | (355.8) | (535.3) | (621.7) | (664.1) | (517.0) |
| Impairment & others | 54.3 | (1.8) | |||
| Associates | (26.3) | (26.2) | |||
| Pretax profit | 3,753.3 | 4,020.1 | 4,199.3 | 4,442.2 | 4,969.5 |
| Tax | (942.8) | (896.0) | (1,007.8) | (1,066.1) | (1,192.7) |
| Minority interests | (4.3) | (3.9) | (3.2) | (3.4) | (3.8) |
| Core net profit | 2,806.2 | 3,120.2 | 3,188.3 | 3,372.7 | 3,773.1 |
| Balance Sheet (RMmil, YE 31 Dec) | |||||
| FY23 | FY24 | FY25F | FY26F | FY27F | |
| Cash & deposits with Fls | 14,145.4 | 11,551.6 | 22,815.5 | 22,428.7 | 24,704.2 |
| Marketable securities | 82,474.7 | 91,207.9 | 84,418.6 | 91,207.6 | 100,654.4 |
| Total current assets | 96,620.1 | 102,759.6 | 107,234.1 | 113,636.3 | 125,358.6 |
| Net loans & advances | 219,562.6 | 234,967.6 | 248,661.8 | 265,639.3 | 287,212.5 |
| Statutory deposits | nm | nm | nm | nm | nm |
| Long-term investments | 3,911.8 | 3,829.8 | 4,084.2 | 4,354.2 | 4,746.0 |
| Fixed assets | 1,066.2 | 1,018.3 | 1,018.8 | 1,005.3 | 986.0 |
| Intangible assets | 2,654.1 | 2,649.3 | 2,654.1 | 2,654.1 | 2,654.1 |
| Other long-term assets | 4,877.2 | 4,690.0 | 4,740.0 | 4,813.4 | 4,972.2 |
| Total LT assets | 232,072.0 | 247,155.1 | 261,158.9 | 278,466.4 | 300,570.8 |
| Total assets | 328,692.1 | 349,914.6 | 368,393.0 | 392,102.7 | 425,929.5 |
| Customer deposits | 245,083.1 | 249,565.5 | 264,539.4 | 283,057.2 | 305,701.7 |
| Deposits of other Fls | 17,022.4 | 27,205.0 | 28,589.1 | 30,045.1 | 36,241.1 |
| Subordinated debts | 3,377.2 | 3,380.3 | 3,670.3 | 3,826.3 | 4,071.0 |
| Hybrid capital securities | 5,650.0 | 3,624.8 | 4,161.4 | 4,731.2 | 5,555.5 |
| Other liabilities | 26,648.4 | 33,607.8 | 33,565.7 | 33,870.9 | 35,506.3 |
| Total liabilities | 297,781.0 | 317,383.3 | 334,525.9 | 355,530.7 | 387,075.7 |
| Shareholders’ funds | 30,874.6 | 32.492.2 | 33,825.3 | 36,526.0 | 38,804.2 |
| Minority interests | 36.5 | 39.1 | 41.8 | 46.0 | 49.7 |
| Key Ratios (YE 31 Dec) | |||||
| FY23 | FY24 | FY25F | FY26F | FY27F | |
| Total income growth (%) | (6.5) | 10.7 | 3.8 | 4.9 | 6.5 |
| Pre-provision profit growth (%) | (11.1) | 12.3 | 5.2 | 5.9 | 7.4 |
| Core net profit growth (%) | (6.2) | 11.2 | 2.2 | 5.8 | 11.9 |
| Net interest margin (%) | 1.9 | 1.8 | 1.8 | 1.8 | 1.8 |
| Cost-to-income ratio (%) | 47.5 | 46.7 | 46.0 | 45.5 | 45.0 |
| Effective tax rate (%) | 25.1 | 22.3 | 24.0 | 24.0 | 24.0 |
| Dividend payout (%) | 60.9 | 59.7 | 60.0 | 60.0 | 60.0 |
| Key Assumptions (YE 31 Dec) | |||||
| FY23 | FY24 | FY25F | FY26F | FY27F | |
| Loan growth (%) | 4.8 | 6.9 | 6.0 | 7.0 | 8.0 |
| Deposit growth (%) | 7.9 | 1.8 | 6.0 | 7.0 | 8.0 |
| Loan-deposit ratio (%) | 89.6 | 94.2 | 94.0 | 93.8 | 94.0 |
| Gross NPL (%) | 1.7 | 1.5 | 1.6 | 1.5 | 1.5 |
| Net NPL (%) | 1.1 | 1.5 | 1.0 | 0.9 | 0.9 |
| Credit charge-off rate (%) | 0.2 | 0.2 | 0.3 | 0.3 | 0.2 |
| Loan loss reserve (%) | 71.7 | 78.6 | 86.1 | 99.5 | 95.3 |
Source: Company, AmInvestment Bank Bhd estimates
DISCLOSURE AND DISCLAIMER
This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty, representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy or sell any real estate, securities, stocks, foreign exchange, futures or investment products. AmInvestment recommends that you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial, legal or other advice on the appropriateness of the particular investment or strategy.
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