PETALING JAYA: RHB Bank
Bhd is expected to continue delivering steady earnings growth despite lingering concerns over its small and medium enterprise (SME) loan portfolio, underpinned by resilient net interest income, stable margins and improving fee income, according to Hong Leong Investment Bank (HLIB) Research.
The research house also believes the bank’s pivot towards higher-quality commercial lending and disciplined cost management should support its targeted return on equity (ROE) of 10.8%.
“RHB Bank remains on track to deliver steady earnings momentum, supported by resilient net interest income (NII) growth, stable net interest margin (NIM) and improving fee income. While SME asset quality remains a key monitor, management expects impairment pressure to stay manageable with no signs of a sharp deterioration,” HLIB Research said.
Despite the encouraging earnings outlook, the research house maintained its “hold” recommendation and lowered its target price to RM8.30 from RM9.10, saying most of the near-term positives have already been reflected in the share price.
It also flagged a potential overhang from the proposed expansion of the FBM KLCI, which could reduce RHB Bank’s index weighting and weigh on fund flows.
HLIB Research said it came away from a recent meeting with management “feeling cautiously optimistic” on the bank’s earnings trajectory and asset quality outlook.
Although SME financing remains the key area to watch, recent deterioration has been contained.
Of the RM129mil in SME loan flow-downs recorded in the first quarter of 2026, RM40mil resulted from the proactive reclassification of non-delinquent accounts rather than actual credit stress.
Meanwhile, management expects NIM to remain within its guidance of 1.83% to 1.86%, albeit towards the lower end following a strong first quarter.
The research house cited that the management remained confident of achieving its loan growth of 5% to 6% this year, to be driven by mortgages and commercial lending. Combined with improving funding efficiency, management expects NII growth to remain a key contributor towards achieving its ROE target.
An analyst told StarBiz he remained constructive on RHB Bank with the bank as his top banking pick for the second half of 2026, citing the sector’s resilient earnings, stable asset quality and strong capital buffers despite external uncertainties.
“We favour RHB Bank for its resilient earnings profile, healthy dividend yield and solid capital position,” he said, adding that the bank remained one of the more defensive names within Malaysia’s banking sector.
