Secured Official Approval From BNM and MOF

RHB Bank announced that Boost, a prominent regional fintech leader, and its consortium partner have secured official approval from Bank Negara Malaysia (BNM) and the Ministry of Finance (MOF) to initiate digital banking operations, effective January 15, 2024. Notably, the Boost-RHB Digital Bank Consortium obtained regulatory approval ahead of the initially planned timeline following a comprehensive operational readiness review validated by BNM.

To recap, the consortium, wherein Boost holds a 60% equity stake, and RHB owns the remaining 40%, was one of the five successful license applicants announced by BNM in April 2022. Although the Boost-RHB Digital Bank Consortium has demonstrated a robust foundational infrastructure for the digital bank, now named Boost Bank, it will undergo an alpha-testing phase involving internal employees, family, friends, and a select group of customers before the public launch. The digital bank aims to enhance its product propositions and refine the user experience during this phase.

Consortium to Open New Avenues for RHB

We eagerly anticipate the unveiling of the products and services to address financial inclusion gaps for underserved and unserved populations. With Boost leveraging its fintech expertise, Axiata's network of customers, and RHB's financial expertise, the consortium's strategic positioning is anticipated to open new avenues for RHB to cater to a previously untapped customer segment. However, we note that intense competition is expected during gestation, as traditional financial institutions are also strengthening their digital capabilities and offerings.

Financial Impact to be Immaterial for Now

At this juncture, we do not foresee a substantial near-term contribution to the RHB group from this consortium, aligning with the announcement that the commencement of Boost Bank's operations as a digital bank is not expected to materially impact RHB Bank's consolidated earnings or net assets for the financial year ending December 31, 2024.

Valuation and recommendation With that, we are keeping our forecasts unchanged. Our TP for RHB is upheld at RM5.70, derived from an implied PBV of approximately 0.74x based on the Gordon Growth Model. We reiterate our HOLD recommendation on RHB

Source: TA Research - 9 Jan 2024