UOB Kay Hian
Date of Report: Friday, 29 August 2025
RHB Bank Bhd 2Q25 Results: Solid Non-Interest Income Drives Growth, Attractive Valuation Presents Re-Entry Opportunity
Executive Summary: RHB Bank Delivers Robust 2Q25 Performance
RHB Bank Bhd, the fifth largest fully integrated financial services group in Malaysia by total assets, reported a strong set of results for the second quarter of 2025. The bank’s performance was underpinned by robust non-interest income growth, lower provisions, and prudent risk management, all while offering a compelling dividend yield and trading at an attractive valuation below the sector average.
Stock Overview and Investment Thesis
Share Price: RM6.67
Target Price: RM7.55
Upside Potential: +15.8%
Dividend Yield: 7%
Price-to-Book (P/B): 0.82x (sector average: 1.10x)
Return on Equity (ROE): 10%
CET1 Ratio: 16%
Major Shareholders: EPF (37.9%), OSK Holdings (10.3%)
RHB Bank’s current valuation offers a significant discount to its peers despite delivering a competitive ROE and a strong capital base. The bank maintains a BUY recommendation, highlighting its strong fundamentals, attractive yield, and the potential for further upside.
2Q25 Financial Results: Key Highlights
RHB Bank’s 2Q25 results came in line with expectations, with net profit climbing to RM804 million, an increase of 11.2% year-on-year (YoY) and 7.1% quarter-on-quarter (QoQ). First-half 2025 (1H25) earnings stood at RM1,553.5 million, up 7% YoY, driven by a sharp rise in non-interest income and substantially lower credit provisions.

Key Drivers:
Non-interest income: Surged 42% YoY and 64% QoQ, propelled by robust forex and trading gains.
Provisions: Net credit cost normalized to 18bps (versus 32bps in 1H24), aided by higher recoveries.
Negative JAWS and NIM compression: Marginally offsetting gains, with Group NIM slipping 3bps QoQ to 1.81%.
Operational Performance & Loan Growth
RHB Bank’s loans grew a healthy 5.9% in 1H25, outpacing industry averages with domestic growth at 7.8%. The main contributors included:
Mortgages: +8.2% YoY
Auto loans: +10.2% YoY
Corporate loans: +11.4% YoY
Commercial banking: +18.7% YoY
SME: Flattish
Management’s loan growth guidance for 2025 remains at 5–6%.
Net Interest Margin (NIM) and Cost Dynamics
NIM: Group NIM slipped by 3bps to 1.81% in 2Q25. This was attributed to lower SORA rates in Singapore and softer yields on USD interbank lending amid expectations of US Fed rate cuts.
Management Guidance: Deposit repricing is expected to partly offset July’s OPR cut. The forecast for 2025 is a modest 3bps NIM compression, in line with management’s 3–6bps guidance.
Asset Quality and Provisions
Gross Impaired Loans (GIL) Ratio: Stable at 1.51% (up 1bp QoQ), with domestic GIL at 1.27%.
Loan Loss Coverage (LLC): Improved to 77% (pre-COVID-19 levels), or 117% including regulatory reserves.
Net Credit Cost: Rose 2bps QoQ to 19bps in 2Q25, mainly due to additional pre-emptive provisions (RM35 million) against US tariff risk. Total pre-emptive provisions set aside to date: RM76 million.
Management Guidance: 2025 net credit cost expected to remain within 15–20bps.
Strategic Non-Interest Income Management
RHB’s decision to defer FVOCI (Fair Value through Other Comprehensive Income) gains in 1Q25 allowed the bank to capitalize on sharper bond yield declines in 2Q25, resulting in a 125% QoQ surge in FVOCI unrealized reserves to RM893 million. This provides significant headroom for sustaining strong non-interest income in the coming quarters.
Outlook and Guidance for 2025
Management maintains a constructive outlook for 2H25, with several key levers to support earnings growth:
Loan Growth: 5–6%
Net Credit Cost: 15–20bps
ROE: 10.4–10.8%
GIL Ratio: 1.40–1.50%
Cost/Income Ratio (CIR): <45.5–46.0% NIM: 1.80–1.83% The bank expects stronger NOII from FVOCI gains and wealth management, margin recovery from deposit repricing, and potential recoveries from domestic SMEs and ECL writebacks in Cambodia. Financial Summary and Key Metrics

Balance Sheet and Asset Quality: 2025–2027F

ESG Initiatives
RHB Bank continues to advance its Environmental, Social, and Governance (ESG) agenda:
Environmental:
Green loan commitment of RM3.3 billion as at June 2021, with 20% allocated to renewable energy projects.
Target to achieve RM5 billion in Green Financing by 2025.
Zero new coal financing from 2022 onward.
Social:
30% women representation on the Board, 26.1% in upper management.
Over RM2 million allocated annually to the RHB X-Cel scholarship programme, benefiting 1,400 underprivileged (B40) students.
Governance:
Independent Non-Executive Directors (INED) make up 60% of the Board, up from 55% previously.
Valuation and Recommendation
RHB Bank is currently trading at 0.82x P/B, a significant discount to the sector average of 1.10x, with a comparable ROE of 10%. The dividend yield remains robust at 7%, underpinned by a strong CET1 ratio of 16%. The bank offers a compelling re-entry opportunity for investors seeking value, stability, and income.
Recommendation: Maintain BUY with a target price of RM7.55 (0.96x 2026F P/B, 10.0% ROE).
Key Assumptions

Conclusion
RHB Bank’s 2Q25 results reinforce its position as one of Malaysia’s leading financial institutions, blending prudent risk management with strong growth in non-interest income. With a discounted valuation, high dividend yield, and positive outlook for the remainder of 2025, RHB Bank stands out as a compelling investment opportunity for value-focused investors. The bank’s commitment to ESG principles and its proactive approach to risk and capital management further solidify its long-term investment case.