In contrast, among the large-capitalised banks, Malayan Banking’s share price has risen 2.9% since releasing its results for the January-to-March quarter, while CIMB Group Holdings’ fell 3.8% and Public Bank’s gained 0.8%. That of Hong Leong Bank and AMMB Holdings fell by 2.6% and 0.8%, respectively.
So, what’s driving the interest in RHB Bank, considering that its earnings for 1QFY2026 were not especially outstanding?
Analysts consider its net profit of RM856.8 million in that quarter — up 14.2% y-o-y but down 5.4% q-o-q — to be within expectations, coming in at close to 25% of a consensus forecast for the full year.
The main appeal seems to lie in the fact that it has among the highest dividend yields in the sector, and is one of the few banks expecting to grow return on equity (ROE) this year. Its valuations are also still compelling relative to the larger banks, analysts tell The Edge.
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In separate moves last week, Nomura Research and Maybank Investment Bank Research each named RHB Bank as their top pick for the sector.
“A key reason is that RHB Bank is one of the few banks which guided to ROE expansion in FY2026 and it still seems comfortable with the ROE target it had set [earlier this year], whereas most other banks are now pointing to some downside risks to their targets for various reasons, whether from the Iran war, asset quality or weaker non-interest income (NOII). RHB Bank has good NOII and current account and savings account (casa) momentum, which is helping that ROE expansion goal,” Nomura Research banking analyst Tushar Mohata tells The Edge when asked about the foreign research house’s preference for RHB Bank.
“The second reason is that it has one of the highest dividend yields among the large-cap banks. That should limit downside risks to share price.
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“And third, its valuation is quite reasonable compared with the other big banks,” he adds. RHB trades at about one-time the forecast FY2026 book value compared with 1.3 times for Maybank and 1.5 times for Public Bank, Nomura notes in a June 3 report on the banking sector.
Mohata is of the view that the stock has legs to run further. Nomura Research upgraded RHB Bank to a “buy” from “neutral” following its 1QFY2026 financial results and raised its target price by 50 sen to RM9.50.
“I expect it to command a higher valuation multiple given its largely intact outlook seen so far. The universe of foreign fund managers tracking RHB Bank is smaller, but as and when they discover the story, they would invest in it, leading to a gradual increase in its foreign shareholding.
“If you notice, after the Iran war began, RHB Bank was one of the banks which corrected the least among its peers in the stock market. The stock held up pretty well,” he says.
Foreign shareholding in RHB Bank has risen to 22.4% as at April 30 compared with 20.09% a year earlier and 14.55% the year before that.
In its banking report, Nomura described the recent results season as “disappointing” and it cut its earnings estimates for all the banks under its coverage, with the exception of RHB Bank.
Its top pick after RHB Bank is CIMB Group, followed by AMMB.
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“Weaker NOII, due to non-recurrence of 2H2025’s overnight policy rate (OPR) cut-led trading gains, was the main source of disappointment, in line with our expectations and the energy-shock related asset quality weakness is yet to come,” it notes.
“Following the 1QFY2026 results, we have lowered our earnings estimates for all banks except RHB Bank. Consensus earnings have also seen downward revisions. We expect the aggregate net income of our top six covered banks to grow 1% y-o-y to RM36 billion in FY2026, driven by a slight net interest margin (NIM) recovery and asset growth,” it adds.
Nomura Research raised its FY2026 and FY2027 earnings forecast for RHB Bank by 2.8% and 3.3% respectively, on the back of higher NIM and lower operating expenditure (opex) assumptions.
Following the 1QFY2026, RHB Bank maintained its guidance for ROE of 10.8% to 11% this year (FY2025: 10.5%), loan growth of 5% to 6% (FY2025: 5.4%) and NIM of 1.91% to 1.94% with liability management (FY2025: 1.88%).
The bank also kept its guidance for gross impaired loan (GIL) ratio of 1.35% to 1.40% (FY2025: 1.41%) and credit costs of 13 basis points (bps) to 14 bps (FY2025: 13 bps). According to some analysts, RHB Bank’s management mentioned during the results briefing that the credit cost guidance does not include the macroeconomic factor adjustments that will be done in June.
CGS International Research maintained a “buy” on RHB Bank and expects the lender’s net profit to grow 12% y-o-y and 5% q-o-q to about RM900 million in the second quarter, which would be close to the all-time quarterly high of RM905.7 million recorded in the final quarter of 2025.
“The key drivers would be q-o-q increase in net interest income and potential chunky write-back of provision for corporate loans. If the above is achieved, this will be the second consecutive quarter of net profit growth,” it says in a May 29 report.
Bloomberg data shows that of 17 analysts that track RHB Bank’s stock, 12 have a “buy” call while the rest have a “hold”. The average 12-month target price was RM9.10, which suggests further upside.
Among those with a “hold” call is AmInvestment Bank Research. “It is largely because of two things. One is its credit cost guidance of 13 bps to 14 bps for this year, which includes recoveries. Recoveries have not come to fruition in a big way yet. They will [likely only] come in the following quarter. I don’t think this net credit cost can be repeated in FY2027,” its banking analyst Chan Jit Hoong tells The Edge.
“Second, with the backdrop of what’s happening in the Middle East, it [credit cost guidance] seems a bit too optimistic, in my view,” he adds.
The group’s GIL ratio deteriorated to 1.47% as at end-March, compared with 1.41% at the end of last year. In Malaysia, the ratio moved up to 1.28% from 1.0%.
“Where it is seeing some stress is in mortgages, unsecured loans and small and medium enterprises. Part of the increase is deemed to be seasonal in nature. Of the RM129 million q-o-q increase in SME GILs, management took a conservative stance and reclassified around RM40 million to Stage 3, even though they had not defaulted yet. This was offset by lower GIL ratios for corporate and commercial lending,” Maybank IB Research notes in a June 2 report.
GIL ratios in the bank’s overseas markets of Thailand and Cambodia, however, remain elevated, following the Covid-19 pandemic. The GIL ratio in its Thailand operation stood at 47.25% as at end-March 2026, compared with 48.9% three months earlier. For the Cambodia operation, it increased to 14.04% from 12.92% during the same period.
“In Cambodia, GILs increased by RM25 million q-o-q due mainly to one particular account that is well secured. In Cambodia, the authorities have allowed for some leniency in the restructuring of loans. Most of the loans are asset-backed and recoveries have been stepped up. In Thailand, lending has resumed and the GIL ratio has stabilised over the past three quarters,” Maybank IB notes.
Nevertheless, RHB Bank’s loans in those two markets make up only a small portion of overall group loans. Thailand accounts for just 0.37% of the group’s total loans of RM253.96 billion while Cambodia accounts for 1.02%.
Maybank IB Research has a target price of RM9.40 on RHB Bank and points out that the estimated FY2026 dividend yield of 5.9% is attractive. “We have assumed a dividend payout ratio of 60% [in FY2026]. The payout ratio was a higher 65% in FY2025 as the group returned about RM1.3 billion it had received from its new banca arrangement.”
This story first appeared in the June 8 issue of The Edge Malaysia
