RHB Capital 1H Net Profit Up 29%

-- Increase in Net Profit to RM146.4 million

Kuala Lumpur, 26 th February 2004:- The Rashid Hussain Berhad group of companies ("RHB Group") announced today its financial performance for the first half ended 31 December 2003 of financial year June 2004 (‘FY 2004’). At RHB Capital Berhad ("RHB Capital") level, consolidated profit before Irredeemable Non-cumulative Convertible Preference Shares (INCPS) dividend, taxation and zakat increased by 17% to RM308.8 million, while net profit was up 29% to RM146.4 million from RM113.7 million in the previous corresponding period.

Group results improved, due in large part to a 5% growth in non-interest income to RM304.0 million. Loan loss provisions also declined further by another 30% to RM223.4 million. Group-wide cross-marketing measures helped to register a notable contribution from RHB Insurance, which achieved an increase in Profit Before Tax of 20%, from RM11.1 million to RM13.3 million for the corresponding period.

RHB Group Executive Chairman, Dato Sri Sulaiman Abdul Rahman Taib commented that, "The prospects for maintaining RHB Capital’s good financial performance are positive, as it continues to increasingly extract Group-wide synergies amidst improving equity market and economic conditions. Fresh strategic initiatives, especially at RHB Bank, continue to be vigorously implemented as the Group positions for strong and sustained growth".

Non-interest income increased by 5% to RM304.0 million, as the Group succeeded in capitalising on the much improved equity market conditions during the period under review. RHB Securities achieved a turnaround and registered a pretax profit of RM15.4 million compared to a RM0.4 million loss in the last corresponding period.

The Group’s loan loss provisions maintained its downward trend as it declined by 30% to RM223.4 million. There was, however, a marginal up-tick in Net Non-Performing Loans (‘NPL’) to 8.7% from 8.5% as at June 2003.

RHB Insurance""s Profit Before Tax increased 20% from RM11.1 million to RM13.3 million. Gross Premium written during the period under review increased by 12.9% from RM62.7 million to RM70.8 million. For the 6 month period, Fire Insurance (a segment with relatively low claims ratios) maintained dominance in RHB Insurance""s portfolio of business, accounting for 40% share.

The Group’s overall gross loans portfolio contracted by 3% in the first half of FY 2004 to RM45.8 billion, partly reflecting the transitory effect of the Group’s strategic shift towards re-shaping RHB Bank as well as enhancing its competitiveness, especially in consumer banking. The competitiveness of other business segments at RHB Bank are in the process of being further augmented with the introduction of new services and banking solutions, especially for the commercial and corporate banking segments, such as ‘Programme Lending’.

With vigilant asset-liability management, the Group’s net loans to total deposits ratio has improved to 80.2% from 81.0% as at June 2003. Deposits from customers have been reduced to match the Group’s lending position, while the funding structure has been improved.

During the period under review, net interest income declined marginally by 1% to RM680.8 million, as the Group’s net lending margin declined in a competitive lending environment.

Nonetheless, RHB Bank remained as the Group’s largest profit contributing subsidiary, with the Bank achieving an improvement in its pre-tax profit (before INCPS dividend, taxation and zakat) of 9.8% to RM180.4 million. Boosting results was the financing arm, RHB Delta, which carved commendable inroads into the financing of transport vehicles. Despite the slowdown in new car sales during the period under review, lending expanded by 20% to RM1.7 billion on the back of concerted marketing initiatives and competitive rates.

Also, income from Skim Perbankan Islam (SPI) operations, or Islamic Financing, grew strongly by 48% to RM62.7 million. Total lending under SPI expanded by 7% to RM3.1 billion from RM2.9 billion as at June 2003.

RHB Bank has furthermore remained strongly capitalised, as its Risk-Weighted Capital Adequacy Ratio strengthened to 13.5% from 13.0% as at June 2003.

With favourable earnings growth in the 1 st half of FY 2004, RHB Capital’s shareholders’ funds and total assets both improved by 3% to RM4.0 billion and RM71.8 billion respectively, while net tangible assets per share increased by 5% to RM1.54. The Group has declared an interim dividend of 3% to reward its shareholders.

Dato Sri Sulaiman concluded that, "The economic outlook has improved and the RHB Group is well poised to capture the improvement in market conditions by expanding our depth and reach in providing enhanced commercial and merchant banking solutions to our clients. Competition has intensified, but we will fortify the Group’s competitiveness by harnessing more cross-marketing synergies within the Group, as well as leveraging on our strong fundamentals, extensive resources in terms of our people, technology, products and services, as well as financial strength. The RHB Group remains committed to setting standards of excellence as Malaysia’s Premier Financial Products and Services Group".

Unaudited Consolidated Results for financial period ended 31 December 2003 for RHB Capital Berhad and Rashid Hussain Berhad are accessible @ www.rhb.com.my after midnight February 26, 2004. For easy reference, a table of financial highlights for RHB Capital Berhad follows:

* restated

This release contains forward-looking statements such as the outlook for the RHB group of companies. Although RHB believes that the expectations reflected in such future statements are reasonable at this time, there can be no assurance that such expectations will prove correct. Actual performance may be materially different from that anticipated or described herein, and RHB’s financial and business plans may be subject to change.

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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.

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