RHB

1. Introduction

RHB Bank Berhad is the main subsidiary under RHB Banking Group. It is under the

Commercial Banking Group and is fully owned by RHB Capital Berhad. RHB Bank wholly

owns RHB Islamic Bank Berhad. Under a new corporate structure, various businesses have been

categorized into four Strategic Business Units (SBUs). RHB Bank Berhad is under the retail

banking category, serving retail customers and also small businesses. The bank’s forte is in

products such as insurance, wealth management, hire purchase, cards and unsecured loans as

well as secured loans that provide mortgages for both individuals and also small and medium

enterprises.

RHB Banking Group has gone through various mergers and partnerships, forming the

RHB Banking Group as it is today. The presence of the group today is the results of mergers of

Kwong Yik Bank Berhad, Sime Bank Berhad, DCB Bank Berhad and Utama Banking Group.

Kwong Yik Bank Berhad was formed in 1913 and was the very first local bank in Malaya. In

1997, DCB Bank Behard merged with Kwong Yik Bank Berhad to form RHB Bank Berhad,

turning a medium-sized bank into the third largest integrated financial services group in

Malaysia. The merge was also the country’s biggest ever banking merger. In 1999, Sime Bank

Berhad merged with RHB Bank Berhad, becoming part of the RHB Banking Group. Finally in

2003, Utama Banking Group merged with RHB Bank Berhad.

In RHB Bank, the bank emphasizes several core values, which are customer focus,

teamwork, respect, innovation and quality service. We believe that with these values, we can

achieve our vision which is to be among the top three financial institutions in ASEAN by year

2020. The Board of Directors of RHB Bank Berhad consists of two Non-Independent Non-

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Executive Directors, being Datuk Azlan Zainol and Encik Johari Abdul Mud. Its Independent

Non-Executive Directors are Dato Abdullag Man Noh, Encik Haji Khairuddin Ahmad, Mr Ong

Seng Pheow and Dato’ Othman Jusoh. The Managing Director of RHB Bank is Dato’ Tajuddin

Atan.

2. Methodology

In order to complete this assignment, we have to analyze and interpret the sources such as

the quantitative resources and also the qualitative resources that we get from the internet and the

website of RHB Bank carefully. The quantitative resources are the reference from our textbook

and the financial reports that we have downloaded from the website of RHB Bank from the year

2004 to year 2009 with income statements, balance sheets and statements of cash flows in it. In

addition, we have used qualitative sources to analyze and identify the performance of the bank.

For example, we have used the vision and mission statement of the bank, their websites, articles

and news to analyze the performance of RHB Bank.

While doing our analysis for RHB Bank, we have done comparisons on the data from the

year 2004 to 2009 by using charts and bars. Besides, we have also used formulas and also certain

ratios to evaluate the annual performance of the bank.

During our first meeting, we have also identified the different areas in which we would

like to analyze and have divided them among our members. Meetings are also held once a week

to make sure that every group member is on the track and in the process of completing the

project. Whenever we have problems, we will discuss with each other or seek guidance from

Datin Dr Joriah. Other than that, we also refer to our course mates or seniors in order to complete

our assignment on time.

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3. Data Analysis

3.1. Total Asset

Year Total Asset( RM’000)

2004 71,320,123

2005 74,154,469

2006 85,948,893

2007 85,063,579

2008 84,238,533

2009 (estimated value) 120,316,004

Source: RHB Bank Berhad, Annual Report of year 2004 to September 2009

Figure 1: Total Assets

Total asset is the total amount of additional of current assets and fix assets. Based on the

histogram above, the total asset of RHB Bank has increased from 2004 to 2006 but decrease

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slightly from 2006 to 2008. In 2009, it is estimated that there is a large amount of increase in the

total assets of RHB Bank. The percentage of increase in the year 2009 is estimated to be 42.83%,

from RM 84,238,533,000 to the estimated value of RM120, 316,004,000. The difference is

RM36, 077,471,000. The large increase in total asset happens because RHB Bank, the third

largest bank in Malaysia is increasing their branches and expanding their market share in

Malaysia.

From year 2005 to 2006, there is a 15.9% increase from RM 74,154,469,000 to RM85,

948,893,000. The increase happens because RHB Bank is now stable and can be trusted so the

public feels safe to invest or deposit their money in RHB Bank. From year 2006 to year 2008,

there is a slightly decrease in total asset. This occurs because the performing loan has decreased

compared to previous year, affecting the total asset.

3.2. Current Assets

Year Current Assets (RM’000)

2004 50,237,819

2005 51,611,650

2006 58,142,668

2007 65,774,843

2008 65,411,978



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Figure 2: Current Assets

Current assets are the assets of a bank or company that can be easily converted into cash,

bank accounts and account receivables in a short time to pay a bank’s debts or do investments.

From the chart above, we can see that current assets are increasing in a slow rate from year 2004

to year 2007. There is a fall from year 2007 to year 2008 in current assets, where the cash and

short term funds in the bank decreased about RM 3,346,261,000. In addition, the deposits in

placement with banks and other financial institutions decreased very much which was from RM

2,964,499,000 in year 2007 to RM 848,371,000 in year 2008. This might be due to the reason

that other banks and financial institutions have removed their deposits from RHB Bank to

finance their debts, payments or investments. After that, the current assets continued to grow

from year 2008 to year 2009 and is estimated to reach the highest amount of current assets in the

year of 2009 which will be RM 94,786,531,000. This happens when other banks and finance

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institutions put more deposits in RHB Bank due to the higher interest rates offered by RHB

Bank.

3.3. Return on Asset

Year Net profit

(RM’000)

Total asset

(RM’0000)

Return on asset (%)

2004 339,174 71,356,012 0.48

2005 269,802 74,154,469 0.36

2006 392,045 85,948,893 0.46

2007 645,393 85,063,579 0.76

2008 936,456 84,238,533 1.11

2009 (estimated value) 1,150,901 120,316,004 0.96

Source: RHB Bank Berhad, Annual Report of year 2004 to December 2009

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Figure 3: Return on Asset

Return on asset (ROA) is measured by dividing the net income of one’s company by its

total asset. It indicates the ability of a company to generate profit relative to its total asset.

Basically, the higher the number, the more efficient the company in using its assets. Based on

the chart above, RHB bank has a positive value of ROA from the year 2004 to 2009. In year

2004, the ROA was 0.48% but it dropped to 0.36% in year 2005 due to the incline in interest

income as a result of the increase in inflation rate. Then, the value of ROA increased to 1.11% in

2008. This shows the excellence of RHB Bank in credit management by having training

programs to develop the skills of its employees. In year 2009, the value of ROA is estimated to

drop from 1.11% to 0.96%. This is because RHB Bank aims to focus on its core business and

expands its business by improving its infrastructures and services to increase the value of

customers.

3.4. Liquidity Ratio

Year Current Assets

(RM’000)

Current Liabilities

(RM’000)

Liquidity Ratio (%)

2004 50,237,819 51,552,452 0.98

2005 51,611,650 50,615,012 1.02

2006 58,142,668 57,123,934 1.02

2007 65,774,843 69,593,046 0.95

2008 65,411,978 67,848,155 0.96

2009 (estimated value) 94,786,531 98,714,787 1.00

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Figure 4: Liquidity Ratio

The liquidity ratio measures the bank’s ability to pay short term obligations. The higher

the liquidity ratio, the more capable the bank in paying its short term obligations because it has

more current assets than current liabilities to pay the short term obligations or investments. From

the chart above, the liquidity ratio of RHB Bank increased from year 2004 to year 2005 and

maintained at 1.02 until year 2006. The increase from year 2004 to year 2005 implies that the

current assets of the bank, which is cash and short term funds increased. There is a big fall in the

liquidity ratio from year 2006 to year 2007 because the cash and short term funds decreased

about RM 6,738,025,000, bringing a big negative impact to RHB Bank because they may not

have enough of current assets to pay debts on that particular period and this resulted an increase

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in the current liabilities which contributed to lower liquidity ratio. Then, the liquidity ratio

increased from the year 2007 to the year 2009.

3.5. Total Loans

Year Total Loans (RM’000)

2004 37,607,363

2005 37,090,808

2006 46,879,331

2007 47,470,523

2008 52,600,047



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Figure 5: Total Loans

A loan in recognized when cash is advanced to borrowers. They are initially recorded at

fair value. The amount of loans lent by RHB Bank to borrowers has seen an increase since the

year 2003. In 2004, the total loan was RM37,607,363 ( in thousands). In 2009, the amount of

total loan increased by almost twofold to RM 74,814,364 (in thousands). The increase was a

generous sum of RM 37,207,001. Compared to the total loans in 2004, it increased by 98.9%.

The increase of total loans as years go by indicate that RHB Bank has been gaining trust by the

public. It also shows that the loan provided is able to cater for various individuals. The bank

itself has also introduced different range of loans such as car loan, home loan, personal finance

etc. The great increase in loans borrowed by the public also indicates that the interest rates set

are affordable and well accepted.

3.6. Total Deposits

Year Total Deposits (RM’000)

2004 51,552,452

2005 50,615,012

2006 57,123,934

2007 69,593,046

2008 67,848,155



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Figure 6: Total Deposits

Total deposits are the total deposits from customers plus the total deposits and

placements of banks and other financial institutions. From year 2004 to 2006 and year 2007 to

2008, there is only a slight difference in the total deposits. But, from year 2006 to 2007 and year

2008 to year 2009, there is a major growth in the total deposits.

From year 2006 to 2007, total deposits of RHB Bank increased from RM57, 123,934,000

to RM 69,593,046,000, the difference is RM12, 469,112,000, which amounts to 21.83%. From

year 2008 to 2009, the total deposits is estimated to increase RM30, 866,632,000, which is

around 45.49%. In the year of 2001 and 2008, the economy crisis happened because of terrorist

attack and mortgage backed-security (MBS). But in year 2007 and 2009, the increase of the

deposits shows that the economy have recovered and the public have more money to deposit into

banks. Besides, the public have confidence that RHB Bank Berhad will not bankrupt so easily

because of its strong financial position.

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3.7. Asset Quality Ratio

Year Asset Quality Ratio (%)

2004 6.3

2005 5.2

2006 4.6

2007 3.5

2008 2.2

2009 (estimated value) 2.1


Figure 7: Asset Quality Ratio

Asset quality ratio is the ratio of non-performing loans to total loans. From the chart, it is

clearly seen that the asset quality ratio has been steadily declining. The ratio in 2004 was 6.3%,

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meaning 6.3% of the loans borrowed are bad. However, in 2009, only 2.1% of the total are non-

performing loans. Therefore, the smaller the asset quality ratio, the better it is. RHB has been

doing a good job in protect their bank as the quality of the loans determine the earning of the

bank. If the loan is in default, the bank has to suffer the damage, which is its monetary loss.

3.8. Non-performing Loan

Year Operating Income (RM'000)

2004 2,400,251

2005 1,971,138

2006 2,213,752

2007 1,671,707

2008 1,159,999



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Figure 8: Non-performing Loan

Non-performing loans are loans that have been individually reviewed and specially

identified as bad, doubtful or substandard after taking into consideration the realizable value of

collateral, if any, when in the judgement of the management, there is not prospect of recovery. A

non-performing loan is a loan that is in default or close to being in default. Many loans become

non-performing after being in default for 3 months, but this depends on the contract terms.

However, a loan is non-performing when payments of interest and principal are past due by 90

days or more and at least 90 days of interest payments have been capitalized, refinanced and

delayed by agreement or payments are less than 90 days overdue but there are other good reasons

to doubt that payments will be made in full. The amount of non-performing loans has been

unstable over the years, shown in the fluctuating chart as above. Overall, the amount of non-

performing loans for the bank has decreased by RM 791,019 ( in thousands) from 2004 to 2009,

which is a decrease of 33% compared to 2004. This clearly shows the bank has been improving

on their risk assessment and risk control operations when it comes to providing loans.

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3.9. Operating Income

Year Operating Income (RM'000)

2004 639439

2005 975277

2006 1393997

2007 1584793

2008 1812295

2009 (estimated value) 1864328


Figure 9: Operating Income

Operating income is also known as operating profit or EBIT (earnings before interest and

taxes). It is used to measure the earning power from ongoing operations of a bank and it is equal

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to the earning before interest payments and income taxes are deducted. Based on the chart above,

the operating income of RHB Bank grows every year. This implies that the earning power of

RHB Bank is becoming stronger than before. The increase from the year 2004 to year 2006 was

very big but the increase in operating income is at a slower rate after year 2006 until year 2009.

3.10. Operating Expenses

Year Operating Expenses RM(‘000)

2004 892,299

2005 930,044

2006 1,110,953

2007 1,166,258

2008 1,199,452



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Figure 10: Operating Expenses

Operating expenses are the total of personal cost, establishment cost, marketing

expenses, administration and general expenses. Expenses includes salaries and wages, rental

fees, depreciation, advertising expenses, legal and professional fees and etc. From year 2004 to

year 2009, operating expenses are increasing every year, but there is only a slight increase.

The most significant growth is in year 2006. From year 2005 to 2006, operating expenses

increased as much as RM 180,909,000, which is 19.45%. According to annual reports, the

personnel cost increased from RM 503,099,000 to RM602, 715,000 in year 2006. This happened

most probably because of the increase in the bank’s branches. When there are more branches, the

salaries and wages, rental fees and others will increase. Besides, the marketing expenses also

increased from RM92,295,000 to RM 136,482,000 as the bank have spent more in 2006 in

dealers’ handling and warranty fees.

3.11. Net Income

Year Net Income RM(‘000)

2004 339,174

2005 269,802

2006 392,045

2007 645,393

2008 936,456



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Figure 11: Net Income

Net income is equal to the income that a firm has after subtracting the costs and expenses

from the total revenue. Net income can be distributed to holders of common stock as dividends

or held by the firm as retained earnings. Net income can be assumed as net profit for the

financial year. Specifically, net income is calculated by subtracting all allowances, expenses,

interests, preferred stock dividends, taxes, and also other adjustments to the net income from

revenues. Based on the chart above, the net income of RHB Bank has seen a stable increase.

Compared to RM 339,174 ( in thousands) in 2004, the amount increased as much as RM 811,727

( in thousands), which is an amazing 239.3%. However, there was a slight decrease in the net

income in 2005 compared to 2004, which is a decrease of RM 69,372 ( in thousands). This might

be caused due do a inefficiency in the operations and also due to the economy turn down.

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3.12. Interest Income and Interest Expense

Year Interest Income RM(‘000) Interest Expense RM(‘000)

2004 2,422,569 1,290,093

2005 2,824,271 1,519,198

2006 3,994,572 2,158,462

2007 4,360,755 2,358,060

2008 4,364,682 2,134,199

2009 (estimated value) 4,517,289 2,263,487


Figure 12: Interest Income & Interest Expense

Interest income is the interest paid by institutions or customers when RHB Bank provides

loans or hold certain securities. The most interest income is generated from loans, advances and

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financing. Interest expense is the interest paid to customers or others institutions when they

deposit money into RHB Bank.

For interest expense, from year 2004 to 2009 estimated, the amount is increasing except

for year 2008 only. It has decreased RM 223,861,000 compared to 2007. This happens because

the mortgage-backed security caused the economic crisis in 2008. The interest rate decreased, so

most of the public decided to take out their deposit from the bank.

For interest income, from year 2004 to 2009 estimated, the amount keeps on increasing.

Increase is the most in year 2006, it increased from RM 2,824,271,000 to RM 3,994,572,000,

which is 41.43%. This is because the loans, advances and financing had increased for RM

875,601,000 or 44.05%. Besides, the securities held to maturity increased around RM

133,356,000. The increase in this two areas leads to the large increase in interest income.

3.13. Net Interest Margin

Year Net Interest

Income

RM (‘000)

Total Assets

RM (‘000)

Net Interest Margin,

%

2004 1,132,475 71,320,123 1.588

2005 1,305,073 74,154,469 1.760

2006 1,836,110 85,948,893 2.136

2007 2,002,695 85,063,579 2.354

2008 2,230,483 84,238,533 2.648

2009 (estimated value) 2,253,803 120,316,004 1.873


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Figure 13: Net Interest Margin

Net interest income is the difference between the interest income and the interest

expense. Net Interest Margin (NIM) is the measurement of profitability of a bank’s investment.

Net interest margin in the percentage of the net interest income divide by total assets.

From the line graph, the net interest margin increased from year 2004 to 2008, the

percentage increased from 1.588% to 2.648%. This means RHB Bank has maintained

consistency or increase slightly in profitability over the years. But at the estimated year 2009, the

net interest margin decreased to 1.873%. The estimated total asset in year 2009 has a huge

growth, this decreases the net interest margin when the net interest income is divided by total

assets. The huge assets in 2009 means RHB Bank will receive a large amount of interest income,

but the interest income does not increase in year 2009, so the net interest margin decrease to

1.873%.

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3.14. Management Efficiency Ratio

Year Management Efficiency Ratio (%)

2004 0.78

2005 0.69

2006 0.61

2007 0.58

2008 0.54



Figure 14: Management Efficiency Ratio

Management efficiency ratio is the ratio of the overhead expenses to the net interest

income. It is a way of measuring the operating leverage of the bank. It measures how much, in

cents, the bank needs to spent to generate an income of RM 1. In 2004, the management

efficiency ratio was 0.78. This means that 78 cents is needed to generate RM 1. Over the years,

the ratio has suffered a decline. This means that less money needs to be invested or spent in

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order to generate an income. In 2009, the management efficiency ratio is only 0.49. Only 49

cents is needed to generate RM 1. This vast improvement shows that the bank is stable and has

the ability to generate in comes without using a large amount of capital. This also shows that the

management has been improving and has been coming out with various ways in order to

generate income with the minimal amount of capital.

3.15. Shareholders’ equity

Year Shareholders’ equity (RM’000)

2004 3,992,467

2005 4,089,011

2006 4,357,570

2007 4,185,437

2008 6,266,099



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Figure 15: Shareholders’ Equity

Shareholders’ equity is also the net worth of a company or owners’ equity. From the

graph above, the shareholders’ equity of RHB bank increased from RM 3,992,467 ( in

thousands) in year 2004 to RM 4,357,570 ( in thousands) in 2006. As evidence, we can know

that the commitment of RHB Bank to focus on Consumer Banking to create value for its

customers is important for the potential growth in order to gain confidence of the shareholders to

invest in RHB Bank. Besides, RHB Bank merged with RHB Delta Finance which makes the

shareholders more willing to invest due to the expectation of future growth. In addition, RHB

Bank become a financier to international market players in cooperation with JBIC (Japan Bank

for International Cooperation) and JCF (Japan Carbon Finance, Ltd) boosting the performance of

RHB bank. the 3.95 % reduction of shareholders’ equity in 2007is caused by the financial crisis

as the result of the liquidity of Unites States’ banking systems falling abruptly. After 2007, the

shareholders’ equity increased to RM 6,266,099 ( in thousands) in 2008 and it is estimated the

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shareholders’ equity increased to RM 9,200,199 ( in thousands) in 2009 because their service

sector is anticipated to remain strong.

3.16. Return on equity

Year Net profit

(RM’000)

Shareholders’ equity

(RM’000)

Return on equity

(%)

2004 339,174 3,992,467 8.50

2005 269,802 4,089,011 6.60

2006 392,045 4,357,570 9.00

2007 645,393 4,185,437 15.42

2008 936,456 6,266,099 14.94

2009 (estimated value) 1,150,901 9,200,199 12.51


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Figure 16: Return on Equity

Return on equity (ROE) measures how well the company is reinvesting earnings to

generate additional earnings to shareholders. The higher the number, the more profitable the

company is. Investors will usually look on the value of return on equity to evaluate the firm.

Return on equity has dropped from 8.5% in 2004 to 6.6% in 2005 due to the decline in

net profit. It then rises to 15.42% in year 2007 which was the highest value of return on equity

due to the 64.62% increase in net profit. Due to the merger between RHB Bank and RHB Delta

Finance, it had expanded the business of RHB Bank in the banking industry which was able to

contribute more profit to the bank. Return on equity has a slight fall after the year 2007, it was

14.94% and is estimated at 12.51% in year 2008 and 2009 respectively. This is because of the

economic recovering after the credit crisis in 2007.

3.17. Dividends

Year Dividends (RM’000)

2004 189,082

2005 136,842

2006 136,810

2007 136,810

2008 32,146

2009 (estimated value) -


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http://www.investorwords.com/1618/earnings.html

Figure 17: Dividends

Dividends are the payout to the shareholders. Corporation usually pays part of their earnings

which are often declared quarterly.

Generally speaking, the dividends given out were decreasing except in 2006 and 2007 in

which a same amount was distributed in both years. In 2004, the dividends paid was RM 189,082

( in thousands ). There was a drop of 27.62% in the dividends in 2005 compared with the

previous financial year in which the amount of dividends was RM 136,842 ( in thousands ). It

then decreased to RM 136,810 ( in thousands) in 2006 which is same amount with the dividends

paid out to the shareholders in 2007. In year 2008, there was a sharp reduction of 76.50% in the

dividends given to the shareholders which is RM 32,146 ( in thousands) whereas there was no

declaration of dividends in 2009. As evidence, RHB always improve its products and services

and keep adding services and products to enhance the credibility of the bank to the customers in

order to improve their financial performance. RHB Bank also launched the Transformation

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Program in 2007 to strengthen the operation and domestic franchise, in which RHB bank aims to

become third-largest lender in Malaysia and the ASEAN region.

3.18. Earnings per Share

Year Earnings per Share (cent)

2004 8.7

2005 6.9

2006 10.1

2007 16.5

2008 15.6



Figure 18: Earnings per Share

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The basic earnings per share of RHB Bank is calculated by dividing the net profit of the

financial year by the weighted average number of ordinary shares in issue during the financial

year. From the year 2004 to year 2005, there is a decrease in earnings per share. This is because

the net profit earned decreased from RM 3007,542,000 to RM 269,802,000 in the year of 2005

while the weighted average number of ordinary shares remained the same, that was

3,899,972,000 shares in total. Since the earnings per share has a positive relationship with net

profit of the financial year, when the net profit decreases, the earnings per share decreases too.

From the year 2005 to year 2007, the net profit of RHB Bank continued to grow gradually,

therefore, the earnings per share grew gradually too. During the year 2008, there is a reduction

which is due to the increase in weighted average number of ordinary shares issue, which is

bigger than the increase in net profit. With the growing in the net profit from the year 2008 to

year 2009, we estimate that the earnings per share will grow till 15.92 cents. The earnings per

share of the bank can be said unstable when the bank changes the average number of ordinary

shares issue.

3.19. Branches and ATMs

As we know, RHB Bank aims to serve customer value by providing excellent service,

deliver superior shareholder value in the same time benefit the stakeholders. In doing so, RHB

Bank has ensured that the strategies adopted are the most competitive, effective and efficient to

bring the benefit to all stakeholders.

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To achieve these objectives, RHB Bank has enhanced its service quality by implementing

it strategic initiatives based on customer needs; emanate trust and earning respect from

stakeholders. In 2003, RHB Bank has completed the merger of their commercial banking

businesses RHB Bank Bhd and Bank Utama (Malaysia) Bhd. The merger brings to the

transformation of Bank Utama branches into RHB bank. The merger has brought convenience to

customers as RHB bank has a wide network of 470 ATMs and an extended branch network of

222 branches nationwide. In 2004, RHB bank has increased the total number of ATM network to

up to 511, with 289 located at RHB bank branches and the remainder located at public places.

In 1 April 2005, due to the several policy changes especially foreign exchange policy

which the Bank Negara Malaysia loosen the foreign exchange’s rules to expands customers

hedging , RHB bank has strengthen its presence and share in the market by offering its products

and services to a wider customer base. The network of RHB Bank is comprehensive as it consists

of branches and alternative different types of banking channels such as Internet Banking, Phone

Banking and ATMs. As in the end of 2005, RHB Bank had 200 domestic branches and also with

branches at Singapore, Brunei, and Thailand.

In June 2008, RHB Bank opened its new branch as to meet the increasing demand for

conventional banking products and services from East Malaysia. The opening of this new outlet

has brought the total number of RHB Bank Branches to 184. There were 7 branches in Sabah and

1 in Borneo Branch total 8 branches located in Sabah, although it is less than the total amount of

branches if compared to the year 2005 but RHB Bank managed to strengthen their presence in

ASEAN region.

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RHB Bank is the fourth largest bank in Malaysia; RHB bank will restructure its network

to a better position by stronger branding in Malaysia in the following year. RHB Bank have

planned thoroughly to relocate or reduce or increase its branches up to the total about 200

branches of its network. Besides, RHB Bank also plans improve its information technology to

support its operating systems which is able to bring down the cost of doing business meanwhile

improving the products and services provided to fulfill the needs of customers and better able to

compete with other financial institutions.

4.0 Conclusion

From the data analysis above, we have interpreted the RHB Bank financial performance

for year 2004 to the estimate of year 2009. The total assets for the RHB Bank have increased in a

large percentage from year 2004 to year 2009. The increase in total assets shows that RHB Bank

is widely expanding their business and this creates more value to the firm. For the current assets

of RHB Bank, it has increased from year 2004 to year 2009 but there was a small decrease

during the year 2008. Better still, it is estimated to increase gradually in the future to enable the

bank to pay the debts, payments or investment using current assets.

Based on the liquidity ratio graph, there is a big drop during the year of 2007. The bank

met its crisis during the year where the deposits in the bank decreased sharply. Most of the banks

and financial institutions withdrew deposits from RHB Bank causing RHB Bank to lack in

current assets, therefore, lowering the liquidity ratio. Fortunately, the liquidity ratio rose from

year 2007 to year 2009 and it will continue in the future.

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Besides, the total deposits also increased around 50 % from year 2004 to year 2009.

When the customers of RHB Bank increase, the deposits increase. This means that RHB Bank

management have done a good job when expanding the business to gain more market share and

there are more customers who trust RHB Bank

The operating income of RHB Bank increases every year based on the graph. This is due

to the bank strengthening its earning power by implementing some operations to increase the

operating income and profit as well. Thus, it is estimated that the operating income will continue

to rise in the future.

Since the business of RHB Bank has been widely expanding, the operating expenses

surely increases every year to afford the daily operations. Customers of RHB Bank have

increased. Customers that obtain loans from bank will be more than the customers that deposit

credit. So, according to the graph, the interest income and interest expense in year 2004 are

almost equal but in year 2009, interest income has increased a lot. Based on the graph, the net

interest margin increased from year 2004 to year 2008, it shows that the expanding business is

creating value and is gaining profit for RHB Bank.

Based on the dividends graph, the dividend decreased in the year 2005 until year 2006

and the amount of dividends maintained until the year of 2007. By the year of 2008, there is a

sharp decrease in the amount of dividend and there will be no dividend paid to shareholders in

the year 2009. But still, RHB Bank is doing their best to improving its products and services.

In addition, the earnings per share of the bank is not really that stable. It dropped a bit

during the year of 2005 but it rose until year of 2007. After that, there was another small drop in

the year 2008 and it increased again in the year 2009. This is due to the bank changing its

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average number of ordinary shares issue. When the share issues increase, the earnings per share

will decrease like we have seen in the graph.

Although it is financial crisis in recent year, RHB Bank still able to survive in the

banking industry to be the fourth largest bank in Malaysia. The value of ROA and ROE were

better than the previous year if compared with 2004, 2005 and 2006. Generally speaking, RHB

Bank continues to improve its banking services to better gain the credibility from customers and

shareholders. For expansion, RHB Bank has strengthened their presence to 200 branches

network within the ASEAN region such as Singapore, Brunei, and Thailand to meet the demands

of customers. Thus it has given the good future growth to shareholder that it is best to invest in

RHB bank.

The total loans lent to borrowers have increased almost twofold since 2004. The amount

had not seen any decline. This shows that the public trusts in the bank and the products and

services provided caters for a wide range of customers. The non-performing loans of RHB Bank

have been unstable. There have been up and down in the amount of non performing loans.

Therefore, the bank has to improve in its risk assessment when lending out loans.

The asset quality ratio of RHB banks shows a decline. This means that the ratio of non-

performing loans to total loans has been declining. Relative to the total amount of loans, the bank has

been working fairly well in controlling the number of bad loans. The net income has also been

increasing gradually year after year, except for 2005. This may be caused by the inefficiency in

operations in that year also because of the economic turndown. Finally, the efficiency ratio has been

declining gradually. The ratio is the overhead expenses divided by the net interest income. This signifies

that less money is needed in order to generate an income. Therefore, income is generated with a

minimal amount of capital.

33

5.0 Bibliography

RHB Bank Berhad APAStyle org: Electronic references. Retrieved September 30, 2009, from

http://rhb.com.my/corporate_profile/investor_relation/pdf/quarterly_results/2009/RHB%20Bank

%20Unaudited%20FS%20-%2030%20Sep%202009.pdf

RHB Bank Berhad APAStyle org: Electronic references. Retrieved December 31, 2008, from

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2008/RHB

%20Bank%20Berhad%202008.pdf



%20Bank%20Berhad%202007.pdf



%20Bank%20AR06.pdf


http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2005/

RHBBANKBerhadFA2005.pdf


34

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2005/RHBBANKBerhadFA2005.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2005/RHBBANKBerhadFA2005.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2006/RHB%20Bank%20AR06.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2006/RHB%20Bank%20AR06.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2007/RHB%20Bank%20Berhad%202007.pdf




http://rhb.com.my/corporate_profile/investor_relation/pdf/quarterly_results/2009/RHB%20Bank%20Unaudited%20FS%20-%2030%20Sep%202009.pdf

http://rhb.com.my/corporate_profile/investor_relation/pdf/quarterly_results/2009/RHB%20Bank%20Unaudited%20FS%20-%2030%20Sep%202009.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2004/

rhb_bank_annual_report_2004.pdf

Saunders, Anthony., and Cornett, Marcia Millon. Financial Markets and Insitutions. 4th ed. New

York: McGraw-Hill, 2009.

6.0 Appendix

Formulas

1. Total Deposits

= Deposit from customers + deposit and placement banks and other fin. Institutions

2. Total Cost

= Non-interest expense + interest expense

3. Liquidity Ratio

= Current assets / Current liabilities

4. Asset Quality Ratio

= Non performing loans / Total loans

5. Efficiency Ratio

= Non-interest expense / (Revenue – interest expense)

35

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2004/rhb_bank_annual_report_2004.pdf

http://www.rhb.com.my/corporate_profile/investor_relation/pdf/annual_reports/2004/rhb_bank_annual_report_2004.pdf

6. Return on Asset

= Profit after tax / Total assets

7. Return on Equity

= Profit after tax / Shareholders’ Funds

8. Net Interest Margin

= (Interest Return- Interest Expenses)/ Average Earnings Assets

9. Earnings Per share

= (Net Income- Dividends on Preferred Stock)/ Average Outstanding shares

36

RHB

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