RHB Capital 1Q Net Profit Up 17% - Improvement in Net Profit to RM 69.1 million

Kuala Lumpur, 20 November 2003-The RHB group of companies ("Group") announced today the financial performance for the 1st quarter ended 30 September 2003 of financial year June 2004 ('FY 2004'). For RHB Capital, profit before INCPS dividend, taxation, and zakat improved by 10% to RM142.5 million while net profit increased by 17% to RM69.1 million from RM58.9 million in the previous corresponding period.

This was largely due to improvements in non-interest income of 3% to RM149.6 million, while income from Skim Perbankan Islam ('SPI') operations, or "Islamic Finance", increased by 37% to RM31.7 million. Asset quality also saw improvements as net Non-Performing Loans ratio declined to 7.97% from 8.51% as at June 2003. Lower loan and financing loss and provision declined by 30% to RM121.6 million to further enhance net profit figures.

The prospects for further improvement in financial performance remain positive as the Group's synergistic operations tap into the current rejuvenated equity market and economic conditions, while full benefits of ongoing strategic initiatives, especially in Consumer Banking, are expected to yield positive results in a recovering economic climate.

For the 1st quarter ended 30 September 2003, RHB Capital's net profit improved 17% to RM69.1 million from RM58.9 million in the previous corresponding period. Pre-tax profit (before Irredeemable Non-cumulative Convertible Preference Shares ('INCPS') dividend, taxation and zakat) also improved by 10% year-on-year to RM142.5 million.

While embedding the new risk framework on a group-wide basis, the Group's strategic focus on harnessing cross-selling synergies continued to be implemented. RHB Capital Executive Chairman, Dato Sri Sulaiman Abdul Rahman Taib said "Not only have we seen an increase in the number of accounts per customer during the first quarter, but our corporate customers have also taken advantage of structured financing options offered by merchant banking, resulting in some impending IPOs with RHB Sakura as the sole arranger. We are excited about the new business opportunities opening up, and are well positioned to take advantage of the improving business climate"

During the period under review, the Group continued to operate under a competitive lending environment. As such, the Group's net lending margin declined, resulting in a slight dip in net interest income of 4% year-on-year to RM335.4 million. However, given the Group's greater emphasis on consumer banking, it should be noted that profits earned from this business segment are also being recognized as non-interest income. Overall, Group non-interest income increased 3% year-on-year to RM149.6 million.

RHB Capital's gross loans and advances declined marginally by 2% from June 2003 to RM46.2 billion, due to delayed loan repayments in the corporate segment. The Commercial Banking division has approved approximately RM1.7 billion in new loans for the period under review, and these approvals would underpin loan base expansion in the coming financial quarters. When compared to September 2002, the Group's gross loan base expanded by 16%, largely due to the acquisition of Bank Utama.

RHB Capital's lending for the financing of residential property expanded by a healthy 4% to RM10.1 billion while consumption credit exposure grew by 6% to RM2.1 billion from June 2003. Furthermore, issuance of RHB Bank credit cards increased by 18%, as compared to June 2003, to more than 283,000 cards.

Income from SPI operations, or Islamic Finance, increased by 37% year-on-year to RM31.7 million, as the Group continues to emphasize its integrated platform for a 'syariah-safe relationship' with its customers. Gross loans under SPI expanded by 30% from the previous corresponding period to RM3.0 billion.

Improved equity market and economic conditions has facilitated the Group's Investment Banking Division's growth, as demand for brokerage, corporate advisory and underwriting services increases. Reflecting the improved market conditions, RHB Securities reported a 27% year-on-year increase in pretax profit to RM7.4 million. The prospects for further improvement at RHB Insurance remain encouraging, as it continues to leverage on the Group's extensive network for growth. During the financial period under review, RHB Insurance achieved a pretax profit growth of 74% year-on-year to RM6.9 million.

During the financial period ended 30 September 2003, the bond market experienced high levels of volatility, with a sharp increase in bond yields. Benefiting from the Group's prudent management, the impact on RHB Capital was not significant. The Group's trading of fixed income instruments remained a profitable activity during the quarter under review, albeit at lower levels as compared to the immediate preceding quarter, when RHB Capital achieved higher gains by capitalizing on the interest rate environment then. For the quarter under review, the Group's non-interest income improved by 3% year-on-year to RM149.6 million.

The improving trend in asset quality was sustained, as net Non-Performing Loans ('NPL') declined to 7.97% during the period under review, as compared to 9.38% during the previous corresponding period. On a quarter-on-quarter basis, net NPL was reduced by 9% to RM3.4 billion. With the significant improvement in asset quality, the Group's loan loss provision fell 30% year-on-year to RM121.6 million, the lowest in the past eight quarters.

RHB Capital's overhead expenses increased by 18% year-on-year to RM253.0 million, mainly due to enlarged, merged operational expenses at RHB Bank. However, when compared to the previous quarter's overhead expenses of RM267.5 million, an encouraging 5% decline has been recorded in this period.

With improved earnings, the Group's shareholders' funds increased by 4% as compared to September 2002 to RM4.0 billion, while total assets expanded by 24% to RM69.7 billion. The financial performance of the Group's largest contributing subsidiary, RHB Bank, improved further as it generated a pre-tax profit (before INCPS dividend, taxation and zakat) increase of 35% year-on-year to RM77.0 million. RHB Bank remains well capitalized, as its Risk-Weighted Capital Adequacy Ratio improved to 13.6% during the period under review from 13.0% as at June 2003 and 13.2% as at September 2002.

The prospects for improved financial performance for the remaining quarters in FY2004 are positive, despite a challenging and competitive lending environment. In addition to the current impetus on consumer banking and cross-selling initiatives within the enlarged Group, new financial solutions targeted especially at the commercial segment would be introduced to augment the Group's earning and asset base growth. The improvement in asset quality is also a reflection of the new risk framework and credit agenda that is currently being embedded across the Group.

"Business prospects look challenging down the road, though the first quarter was an encouraging start for both our employees and customers. We are now Malaysia's #2 mortgage lender among commercial banks - a position which will likely boost existing momentum from cross-selling synergies. In addition, our investment banking business, bolstered by a refreshed equities market, will also look to advise and bring corporate issuers to more cost-efficient funding as the expected economic recovery widens," said Dato Sri Sulaiman Abdul Rahman Taib.

He concluded "The RHB Group remains committed to growing its leadership role and benchmarking to best practice in the industry. We have grown from strength to strength, and will continue setting standards of excellence as Malaysia's Premier Financial Products and Services Group".

Unaudited Consolidated Results for financial period ended 30 September 2003 for RHB Capital Berhad and Rashid Hussain Berhad are accessible @ www.rhb.com.my after midnight November 20, 2003. For easy reference, a table of financial highlights for RHB Capital Berhad follows:

A leader in financial services, the RHB group of companies (KLSE: RHBCAP) offers innovation and experience in investment & commercial banking and insurance services & products. RHB has earned numerous awards by industry observers and editors, including recognition as "The Best Brokerage in Malaysia" by the editors of Asiamoney in November 2003. Today, RHB managers and staff serve customers via a network of almost 300 branches and outlets in Malaysia, Brunei, Thailand and Singapore.

Click here for RHB"s Unaudited Consolidated Results for the Financial Period Ended 30 September 2003

Click here for RHB Capital"s Unaudited Consolidated Results for the Financial Period Ended 30 September 2003

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