RHB Bank expected to maintain dividends despite rising bond yields

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RHB maintains dividends despite rising bond yields

Highlights

RHB’s RM5.9 billion holdings of fixed-income securities have an impact of only around 32 basis points on its capital position, allowing the forecast dividend of 47 sen per share for 2026 to remain unchanged.
RHB’s common equity tier-one capital ratio stood at a high 14.8% at the end of June, prompting Kenanga to upgrade its recommendation to 'outperform' with a target price of RM8.40, despite the share price falling 12% over three months.
A new capital strategy is expected to be announced in January–March 2027, with Basel 3 reforms expected to lift the capital ratio by 100 basis points before reversing by 45 basis points over five years.

This article was translated from the original. Read the original version by our correspondent here.

2026 dividend outlook and capital strength

As reported by The Edge Malaysia, citing Kenanga Investment Bank in a post-meeting note, the impact of RHB’s RM5.9 billion holdings of fixed-income securities on its capital position is considered manageable, at around 32 basis points. The research firm said RHB is still expected to distribute 47 sen per share to shareholders for 2026.

According to Kenanga, dividend payments depend more on earnings performance, as there are no concerns about the bank’s capital adequacy. RHB’s common equity tier-one capital ratio, which measures a bank’s capital strength based on its highest-quality regulatory capital, stood at 14.8% at the end of June, a level generally considered high by analysts.

Kenanga also upgraded its recommendation on RHB to "outperform", equivalent to "buy", with its target price unchanged at RM8.40 after the bank’s shares fell 12% over the past three months.

Capital strategy and implications for investors

Kenanga expects RHB’s capital strategy to be announced around January to March 2027. The firm said the implementation of the final Basel 3 reforms for RHB, which uses the internal ratings-based approach, could initially increase the bank’s capital ratio by 100 basis points.

However, this increase is expected to be reversed by a 45-basis-point reduction over five years. Kenanga said it assumes this net reduction may need to be replenished as a conservative measure, while higher dividend guidance would be an additional positive for investors.

In our previous article on FBM KLCI weakness, the benchmark index fell as concerns about inflation and the U.S. interest rate outlook once again weighed on investor sentiment. We also highlighted selling pressure in technology/AI stocks and continued foreign fund outflows, which added to the burden on the local market.

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