KUALA LUMPUR (May 12): RHB Bank Bhd's (KL:RHBBANK) proposed disposal of its general insurance arm and integration with Tokio Marine looks to be more concrete and stronger this time compared with the failed 2018 attempt, said analysts.
CIMB Securities said the finalisation of the deal depends on pricing and the creation of merger synergies.
"Nonetheless, prospects for a concrete deal look to be stronger this time as RHB and Tokio Marine Life, in partnership with Syarikat Takaful Malaysia [Keluarga Bhd (KL:TAKAFUL)], successfully worked out an exclusive 20-year bancassurance deal (signed Aug 1, 2025), benefitting all parties through a unified banca operating model.
"... and merging the GI (general insurance) operations of RHB Insurance and Tokio Marine via an integrated partnership will create a combined market share of close to 10% in Malaysia’s general insurance market ...," said the house in a note on Tuesday.
Bank Negara Malaysia (BNM) has officially given RHB the go-ahead to commence negotiations with Tokio Marine Asia for up to a 100% sale of RHB Insurance Bhd.
This will be RHB's second attempt to sell its insurance arm to Tokio Marine after a similar transaction in 2018, where RHB proposed to sell up to 94.7% of its general insurance business to Tokio Marine, but the deal was called off.
Under the latest proposal, a new enlarged general insurance entity will be created, in which RHB Bank intends to hold up to a 35% stake.
The approval requires all parties to conclude negotiations within six months from the date of BNM's letter. Prior to signing any definitive agreements, the parties must also obtain approval from the Minister of Finance upon BNM's recommendation.
The prospects for a successful deal this time are stronger for several key reasons, analysts noted.
For Tokio Marine, the deal would resolve its foreign shareholding issue, as foreign companies can only own up to 70% of a domestic insurer, noted Maybank Investment Bank(Maybank IB).
For RHB Bank, the move would unlock the value of its insurance arm and improve its return on equity.
The transaction would transition RHB from an "owning and underwriting" model to a capital-light, distribution-led bancassurance model with minority participation, noted CIMB Securities.
Back-of-the-envelope calculations by Maybank IB suggest a 35% stake in the enlarged entity would yield RM103 million in net profit. This represents a 9% enhancement to RHB Insurance's FY2025 net profit, or a 0.3% increase to RHB Bank's group profit.
Based on a price-to-book value (PBV) of 1.4 times, the cost to Tokio Marine for a 100% stake in RHB Insurance is approximately RM1.05 billion, added the house.
The cost to RHB Bank for a 35% stake in the enlarged entity would be roughly similar at RM1.03 billion, implying a neutral financial outcome.
Meanwhile, CIMB Securities noted that the merger is expected to be neutral on RHB Bank's capital ratios at the bank level as it is not expected to raise additional capital from shareholders for this exercise.
Instead, capital investments will likely be funded through internally generated funds, the house added.
CIMB Securities maintained a 'buy' rating on RHB Bank, with a target price of RM9.55. Maybank IB also maintains a 'buy' call, with an unchanged target price of RM9.40.
RHB is currently trading at an undemanding FY2026 PBV multiple of 1.0 times, compared to the sector average of 1.2 times, said CIMB Securities.
It also noted that the bank offers attractive dividend yields of 6.5% to 6.9% for FY2026-2027, and with solid capital buffers and healthy loan loss reserve, the house views RHB Bank as a "compelling" buying opportunity.