RHB Bank successfully closes subordinated debt issue of RM2 billion

Kuala Lumpur, 23 November 2007: RHB Bank Bhd has successfully priced an issue of subordinated debt totalling RM2 billion under a Medium Term Note Programme of RM3 billion ("MTN Programme") arranged by RHB Investment Bank Bhd ("RHB Investment Bank").

The subordinated debt will be issued on 30 November 2007 in two tranches. The first tranche has a maturity of 10 non-call 5 (tenure of 10 years with the option to redeem at the end of the fifth year) and the second tranche comes with a maturity of 15 non-call 10 (tenure of 15 years with option to redeem at the end of the 10th year). The first tranche carries a coupon rate of 5.0% and the second a rate of 5.5%, with step-up rate of 50bps per year at each anniversary of the callable (or redeemable) period.

The rating agency RAM Rating Services Bhd has accorded the issue a rating of A1 whilst affirming the bank's long and short-term general bank ratings at AA3 and P1 respectively with a positive outlook.

It is significant to note that the issue represents the single largest subordinated debt ever issued to-date by a financial institution in the domestic market, more so in such a volatile market, noted Michael J Barrett, Group Managing Director of RHB Banking Group.

"This shows that investors remain fully confident in the RHB Banking Group, particularly its improved performance," Mr Barrett said.

He attributed the show of confidence to the recently launched group-wide strategic transformation programme to help the banking group pursue its objective of becoming one of the Top Three financial services providers in the Asean Region.

Managing Director of RHB Investment Bank Chay Wai Leong noted that the subordinated debt issue was over-subscribed by an average of 1.36 times and 10% of the issue went to offshore investors.

"This is in spite of the keen competition from numerous other debt offerings going into the market at about the same time, including two subordinated debt issues by foreign banks based in Malaysia," he said. "This certainly underlines the confidence that the market has in RHB."

RHB Investment Bank was the lead arranger for the MTN Programme. It was also joint book-runner with ABN Amro Bank Bhd for this first issue of RM2 billion while Citibank Bhd acted as co-manager. A roadshow was launched earlier this month to market the bonds to both domestic and regional investors.

Mr Barrett said the RM2 billion subordinated debt issue was part of a capital management plan by RHB Bank to cater for its foreseeable Tier 2 capital requirements and to maintain its risk weighted capital adequacy ratio at a healthy level of above 12%. In addition, it would enable the bank to lower its funding costs and thus help support the RHB Banking Group's transformation initiatives.

"The subordinated debt issue will add further depth to the domestic capital market," he added.

And while the year may be ending soon, it is not over yet for RHB Investment Bank, as more deals are still in the pipeline. "For starters, we will be launching our own subordinated debt issue of up to RM245.0 million before the end of this month," added Mr. Chay.

The RHB Banking Group has also shown significant improvement in its financial performance this year. For the nine months ended September 30, RHB Capital Bhd's net profit jumped 71.6% to RM539.7 million and revenue was 17% higher at RM4.6 billion from RM3.9 billion previously. The group's shareholders' funds grew 39.1% to RM6.9 billion while its total asset base was up 2.3% to RM105.7 billion.