KUALA LUMPUR (Aug 28): RHB Bank Bhd (KL:RHBBANK) is sharpening its focus on growing its fee income, optimising its financial management, and getting more value from its investments, with the aim of raising its return on equity, or ROE, to 12% by 2027 under the bank's internal three-year roadmap dubbed “PROGRESS27”.
The bank posted an ROE of 9.38% for its second quarter ended June 30, 2025 (2QFY2025), up from 9.08% in the preceding quarter.
RHB is accelerating its non-interest income strategy through wealth management, new bancassurance partnerships, and tactical realisations from its investment portfolio, particularly Fair Value Through Other Comprehensive Income (FVOCI), according to group managing director and chief executive officer Datuk Mohd Rashid Mohamad.
FVOCI is an accounting method where a bank's investment gains are not immediately reported as profit until the asset is sold, helping to stabilise its reported earnings.
“Expanding fee-based income streams from wealth management and new bancassurance partnerships will provide additional non-interest income in the second half,” Rashid told a media briefing on the group's results for the first half of FY2025.
RHB has just, on Aug 1, signed 20-year exclusive partnerships with Tokio Marine Life for bancassurance and Syarikat Takaful Malaysia for bancatakaful, through which RHB will exclusively market and distribute their life, family takaful and general takaful products across its network in Malaysia.
The partnerships secure up to RM1.6 billion in access fees for RHB, providing the bank a predictable source of fee income for the next 20 years.
Liability management cushions NIM compression
Meanwhile, the downward trend in the Singapore Overnight Rate Average, or SORA, has hurt the bank’s net interest margin (NIM), which slipped three basis points to 1.81% in 2QFY2025 from the previous quarter. NIM measures the profit a bank makes from lending out money, after accounting for the interest it pays to depositors.
RHB has now revised its FY2025 NIM guidance to 1.80%-1.83%, trimming it from 1.86%-1.90% previously. It expects SORA's drag on NIM to lessen in the second half.
“The repricing typically lags by three to six months, so we expect a narrowing gap in the second half,” Rashid said, indicating that the repricing of its interest-bearing assets and liabilities is a gradual process, and that the rates the bank pays on customer deposits will eventually ease to match the lower rates the bank is earning on its loans.
In the meantime, RHB is leaning on liability management to cushion the impact. Domestic lending remains the core driver, with Malaysia tracking well against industry growth. Singapore is also expected to contribute, albeit selectively.
“We believe some of the approvals granted in 2Q will translate into activity in the second half,” Rashid said.
He also believes the bank is on track to meet its revised loan growth target of 5%-6% for FY2025. In June, RHB trimmed its loan growth forecast from 6%-7% after incorporating tariff impacts.
Boost Bank: Strategic edge in digital banking
On the digital banking front, Rashid said RHB’s 40% stake in Boost Bank positions it advantageously despite intensifying competition, with two new entrants recently joining the existing three: Boost Bank, GXBank and AEON Bank — which started operating between September 2023 and June last year.
KAF Digital Bank and Ryt Bank were the last to join the lineup, both launching their operations this month. While the operational dates of the banks differ, all five licences were announced at the same time by Bank Negara Malaysia in April 2022.
“Boost Bank has introduced a couple of lending products and will continue to launch new offerings,” he said, adding that the bank’s activities have helped stabilise performance and minimise profit and loss impact.
For the quarter ended June 30, 2025 (2QFY2025), RHB's net profit grew 11% year on year (y-o-y) to RM803.5 million, or 18.43 sen per share, thanks to higher interest income and lower provision.
Net interest income rose 3.4% y-o-y while non-interest income fell 1% during the quarter, lifting total income by 2% y-o-y to RM2.16 billion.
Allowances for credit losses fell 38% year-on-year to RM89.44 million.
The bank declared a dividend of 15 sen per share. The date of entitlement and payment will be announced later.
At the time of writing, RHB shares were up six sen or 0.9% at RM6.55, valuing the banking group at RM28.57 billion.