6 days ago
RHB's Earnings Forecast Trimmed Despite New Insurance Deals
CIMB Investment Bank Bhd (CIMB Securities) has maintained its BUY call on RHB Bank Bhd but trimmed its earnings forecasts and lowered its target price to RM7.35 from RM7.50, citing recalibration of assumptions following recent developments, including the landmark 20-year bancassurance and bancatakaful agreements signed with Tokio Marine Life Insurance Malaysia and Syarikat Takaful Malaysia Keluarga.
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.
