RHB's Earnings Forecast Trimmed Despite New Insurance Deals
The renewed exclusive partnerships, announced on 1 August, will see RHB receiving an access fee of up to RM1.615 billion, the largest of its kind in Malaysia for such a tenure. This amount will be amortised over 20 years, with the agreements designed to enhance the bank's non-interest income through stable recurring contributions from insurance and takaful products distributed via its branch and digital channels. CIMB Securities estimates that these agreements will generate an annual fee income of around RM140 million to RM145 million from 2026 onwards, potentially lifting return on equity by 0.3 percentage points in that year.
CIMB Securities noted that the agreements align with RHB's PROGRESS27 strategy, which focuses on scaling fee-based income, deepening digital capabilities and improving customer experience. The introduction of the 'ONE Unified Banca Collective' operating model is expected to streamline collaboration between RHB and its long-standing partners, enabling seamless product integration and consistent service standards.
Despite this positive structural development, the research house revised its 2025–2027 earnings forecasts down by 5%–7%, citing expectations of narrower net interest margins of 1.79%–1.81% compared to previous assumptions of 2.0%–2.1%, given the impact of the recent 25-basis-point rate cut and asset-liability mismatch. Credit cost assumptions were also fine-tuned to reflect a more cautious macro outlook, while non-interest income estimates were adjusted to include the incremental contribution from the renewed banca agreements.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sinar Daily
2 hours ago
- Sinar Daily
Malaysia faces retirement time bomb as longer lifespans, shrinking tax base threaten pension system
SHAH ALAM - Malaysia's retirement system is facing growing pressure as increasing life expectancy, declining savings and a shrinking taxpayer base raise doubts about the long-term viability of the nation's pension structure. Worries over Malaysians' preparedness for retirement have deepened, coming only three years after the government permitted large-scale withdrawals from the Employees Provident Fund (EPF) to help offset job losses during the Covid-19 pandemic. EPF Chief Executive Officer (CEO) Ahmad Zulqarnain Onn stressed the urgency for immediate action, saying it was crucial 'to ensure Malaysians are both financially and socially prepared for longer lifespans.' Projections now indicate that life expectancy could reach 81 years by 2050 — just 25 years away. With a rapidly aging population and a falling birth rate leading to a contracting tax base, fears are growing that future retirees may simply not have enough to live on. Malaysia's retirement savings landscape Malaysia's primary retirement mechanism is the EPF, a defined contribution (DC) scheme in which savings are built through employee and employer contributions, along with investment returns. Civil servants still enjoy a legacy defined benefit (DB) pension that guarantees monthly payouts based on final salary and tenure. While the DB model provides secure retirement income, it imposes significant long-term costs on public finances. Globally, DC schemes are seen as more sustainable because they shift investment and longevity risk away from governments, give individuals greater control over their funds and are easier to manage fiscally. The Covid-19 withdrawals hit hard Economic uncertainty in recent years has tested the resilience of Malaysia's DC model. During the pandemic, more than 8.1 million EPF contributors withdrew over RM145 billion from their accounts, often to cover immediate expenses such as rent, food and debt repayments. The result has been devastating to retirement readiness. Half of members aged 55 and below now have less than RM10,000 each, with the median balance at only RM10,898. Many accounts have been emptied entirely. The lifespan of the average Malaysian has risen, forcing the younger generation to bear the burden of sustaining them through old age for a longer period. Photo: Edited via Canva Living longer, but with less Life expectancy in Malaysia has risen sharply over the past three decades. Men now average 74.8 years and women 78.9 years, compared with 68.7 and 73.4 years respectively in 1990. This longevity comes at a cost. Someone retiring at 60 and needing RM1,500 a month for basic living expenses would require at least RM360,000 to last two decades. Yet, as of 2023, nearly 74 per cent of active EPF members had savings of under RM100,000. Enough for just five to six years, excluding healthcare and elderly care costs. A shrinking tax base compounds the problem Falling birth rates and low tax revenue are further eroding the sustainability of Malaysia's pension system. The country's tax-to-GDP ratio was just 12.6 per cent in 2023, far below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent. According to the Department of Statistics, the live birth rate dropped by 10.2 per cent to 100,732 in the second quarter of 2024 compared with the same period a year earlier. If this continues, there will be fewer taxpayers and EPF contributors in the future, even as more Malaysians retire. Countries that maintain generous DB pensions do so through high taxation and large reserves — conditions Malaysia does not currently have. Without reform, experts warned, the current system risks becoming unsustainable. Potential solutions on the table Experts suggested several measures to safeguard against retirees outliving their savings. These include promoting financial literacy, enhancing saving incentives, creating a modest social safety net and expanding aged-care facilities. One proposal is to introduce a hybrid pension system. Under this model, employees would keep contributing to EPF, but upon retirement, only part of their balance could be taken as a lump sum. The rest would be paid out monthly for life, similar to Singapore's CPF Life. This would reintroduce a guaranteed minimum lifetime income — a feature of the old DB pension — without overburdening public finances. In addition, tax incentives, matching contributions and voluntary top-up schemes could help rebuild depleted savings. The urgency for reform is growing. As Ahmad Zulqarnain emphasised, Malaysia must act now 'to ensure Malaysians are both financially and socially prepared for longer lifespans.' Without decisive action, today's workers could become tomorrow's financially vulnerable elderly — living longer, but going broke sooner.
The Star
a day ago
- The Star
MRL, CCCC ink supplementary ECRL agreement
MRL chief executive officer Datuk Seri Darwis Abdul Razak. PETALING JAYA: Malaysia Rail Link Sdn Bhd (MRL) has signed the supplementary agreement 7 (SA7) with the East Coast Rail Link (ECRL) project contractor for the connection from the last station at Jalan Kastam, Port Klang, to Westports and Northport (Section D). MRL chief executive officer Datuk Seri Darwis Abdul Razak said the company had signed the SA7 with China Communications Construction Company Ltd (CCCC), signifying that the Section D portion will be implemented by CCCC as the main contractor to complete the project. 'There will certainly be further development announcements made in due course in relation to this matter,' he told the media at the RHB-MRL 360 Degree Environmental, Social and Governance (ESG) Financial Ecosystem event in Putrajaya yesterday. Darwis said the SA7 covered a 25-km track from Jalan Kastam in Port Klang to Northport and Westports. 'It will involve the construction of meter gauge and standard gauge simultaneously on the route. 'We have an existing meter gauge under Keretapi Tanah Melayu Bhd, and the standard gauge will also be built, meaning the meter gauge and standard gauge side-by-side, to reach Northport and Westports.' Darwis said the construction of Section D is important to complete the entire rail line network from Kota Baru, Kelantan, to Port Klang, Selangor. 'We are not just stopping at Jalan Kastam but are reaching the two ports (Northport and Westports). Our intention is to ensure that the land bridge connectivity between Kuantan Port and Port Klang will be realised,' he said. He said the SA7 is part of the engineering, procurement, construction and commissioning contract, which was signed in November 2016. The supplementary agreement was previously announced by Transport Minister Anthony Loke last April. Meanwhile, RHB Bank chairman Tan Sri Ahmad Badri Mohd Zahir said MRL is the first government-linked company in Malaysia to establish a sustainable financial value chain transition roadmap, placing proceeds from its green sukuk issuance into RHB ESG deposits while awaiting disbursement for the ECRL construction. 'This ensures that idle funds are not only preserved, but also contribute to national decarbonisation through the use of capital, within a transparent circular sustainable financial model to support broader climate goals,' he said. He said RHB ESG deposits would be allocated to projects aligned with national priorities such as renewable energy, clean transportation and social inclusion. All financing activities are guided by RHB's ESG business activity guidelines, Bank Negara Malaysia's climate change and principle-based taxonomy as well as the Asean taxonomy for sustainable finance. MRL successfully issued its green Sustainable Development Goals sukuk, setting a record by achieving the lowest credit spread ever for a government-guaranteed infrastructure issuance in Malaysia. — Bernama
New Straits Times
2 days ago
- New Straits Times
SD Guthrie responds to Indonesian forest permit concerns
KUALA LUMPUR: SD Guthrie Bhd says less than three per cent of its 180,000 hectares of planted oil palm area in Indonesia is currently under review by the Indonesian government. Addressing concerns over reports suggesting that some of its Indonesian subsidiaries may be operating in forest-designated areas without permits, group managing director Datuk Mohamad Helmy Othman Basha said the matter is not unique to SD Guthrie. Similar overlaps have affected both Malaysian and Indonesian plantation companies operating in the country, he added. CIMB Securities recently highlighted growing regulatory risks for Malaysian plantation companies operating in Indonesia. This followed the Indonesian government's move to seize land lacking proper forestry permits or in violation of land-use laws. SD Guthrie's Indonesian subsidiaries were listed in an official decree, with 3,045 hectares under scrutiny, 1,874 hectares currently under the legalisation process and 1,171 hectares reportedly rejected. "For context, our total planted area in Indonesia is about 180,000 hectares. Less than three per cent of this has been flagged by the authorities as overlapping with forest zones," Helmy said at a press briefing here today. "However, we have our own data that disputes this, and discussions with the Indonesian government are ongoing," he added. Helmy said SD Guthrie continues to manage operations in the affected areas and is in active discussions with the Indonesian government to resolve the land classification concerns Group chief operating officer Mohd Haris Mohd Arsyad said the issue is not about illegal clearing or expansion, but rather differing interpretations of land use boundaries. "There's the Perhutanan (forestry) map, and then there's the map from the ministry that gives us our licenses. Much of this happened before we acquired the land," he said. The land in question was acquired from the Indonesian government in 2001 during a post-financial crisis asset restructuring. Helmy likened the acquisition to Malaysia's Danaharta model, saying that it was conducted with representations and warranties from the government. Chief financial officer Renaka Ramachandran clarified that SD Guthrie should not be associated with deforestation, as the plantations were already established prior to the acquisition. "We never planted the land ourselves. We bought ready-made plantations, and the agreement came with assurances from the government. Accusations of deforestation should not arise," she said. The executives reiterated that SD Guthrie holds valid land titles and has complied with relevant processes. They acknowledged that resolving the matter will require time and continued engagement with authorities. "We're confident this will be resolved, but it's a complex issue that requires ongoing dialogue with the government," said Haris.
