Hong Leong Upgrades RHBBANK to Buy, Flags Potential Dividend Yield Above 9% by 2028
Octopaul AI ·
Hong Leong Investment Bank analyst Raymond Ng Ing Yeow upgraded RHB Bank to “Buy” from “Hold”, raising his target price to RM8.40, implying 8.7% upside. Following the recent sell-off, he considers the balance of potential returns and risks attractive, supported by a projected approximately 7% dividend yield for 2027–2028, capital-return opportunities and potential benefits from higher interest rates.
Raymond identifies RHB’s capital-management plan, expected by 1Q27, as a potential catalyst for higher distributions. Under an illustrative scenario assuming a 100-basis-point uplift to its CET1 capital ratio from Basel III changes, with the resulting capital headroom progressively returned over three years, he estimates the 2028 dividend yield could exceed 9%.
This represents potential upside rather than announced dividend guidance. At approximately 0.9 times forward book value, he views shareholder distributions as an important part of the investment case.
At the sector level, Raymond maintained “Neutral”, despite his expectation of a 25-basis-point OPR increase to 3% in 1H27. His sensitivity analysis assumes a mid-2027 increase and estimates that RHB’s 2027 net profit could be approximately 4% higher than without the hike. However, intense deposit competition could accelerate funding-cost increases and erode the initial margin benefit, limiting the case for a broad sector re-rating.
As of 4:05 p.m. on November 4, RHB Bank’s share price rose 0.3% to RM7.73.
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