RHB earns positive outlook with transformation

Encouraging improvements in the financial profile of RHB due to transformation earned it a positive from stable outlook. According to Standard & Poor's Ratings Services, the transformation consisting of streamlining RHB's core business resulted in an enhanced revenue generating capacity.

Standard & Poor's also raised the ASEAN scale long-term rating on RHB Bank to 'axA+' from 'axA'. At the same time, it affirmed its 'BBB/A-2' counterparty credit rating and 'axA-1' ASEAN scale short-term rating on RHB Bank.

"With further sustained earnings and asset quality improvements following a successful transformation program, the ratings could be raised within the next 12 to 18 months," said Standard & Poor's credit analyst Ivan Tan.

RHB underwent a transformation program after the Employees Provident Fund, Malaysia's state pension fund became its dominant shareholder, and of the Abu Dhabi Commercial bank becoming its strategic stakeholder.

Despite the recent global financial dislocation, RHB Bank's earnings and profit margins have improved notably in recent years, mainly attributable to an increase in lending to the higher-margin commercial and consumer businesses, and lower drag from nonperforming loans. 

Furthermore, its asset quality has also improved steadily, as demonstrated by a sustainable reduction in its absolute gross nonperforming assets since fiscal year 2004, due to tighter underwriting standards.

"Still, RHB Bank's financial performance is dependent on the broader operating environment, and we expect earnings and asset quality to weaken if the global turmoil persists for a prolonged period. Nevertheless, we anticipate that RHB Bank's financial profile, augmented by its recent capital-raising, will strengthen its ability to weather headwinds," Mr. Tan said.