KUALA LUMPUR (Nov 2): RHB Bank Bhd's (KL:RHBBANK) dividend payout appears secure for the year with the fourth-largest bank by assets unfazed by rising bond yields, an analyst said on Monday.

The damage to its capital position from its fixed income securities holdings of RM5.9 billion would be “manageable” at around 32 basis points, Kenanga Investment Bank said in a post-meeting note. RHB is still expected to distribute 47 sen per share to shareholders for 2026, the research house said.

“Dividend payout [is] more a function of profit performance, as capital adequacy [is] not in doubt,” Kenanga said.

The house also upgraded its recommendation for RHB to ‘outperform’ equivalent to ‘buy’ with an unchanged target price of RM8.40 following a 12% drop in the bank’s stock over the past three months.

Banking stocks have been under pressure in recent months as global bond yields climbed. Higher yields generally hurt banks as they take larger paper losses from lower prices of the bonds they hold, which eats into capital and forces them to book losses if they sell.

Investors may also demand higher returns on corporate bonds, affecting appetite for new issuances, dragging on investment banking fees.

RHB’s common equity tier-one capital ratio, a measure of a bank’s capital strength based on its highest-quality regulatory capital, at the end of June stood at 14.8% — a level generally considered high by analysts.

A capital strategy will be unveiled around January-March of 2027, Kenanga flagged, noting that Basel 3 final reforms for RHB that uses an internal ratings-based approach could see its capital ratio rising 100 basis points initially, before the gain reverses 45 basis points over five years.

“We assume this net reduction may have to be restored, as we are being conservative,” Kenanga said. A higher dividend guidance would be a bonus, the house added.

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