RHB Bank’ subsidiary, RHB Islamic Bank, will discontinue its bancatakaful service agreement with BIMB’s 59% owned subsidiary Takaful upon its expiry on July 31, 2020.
KUALA LUMPUR: Syarikat Takaful Malaysia Keluarga Bhd’s share price to a low of RM5.20 on Thursday, which was the lowest since April 2019, after RHB Bank’s announcement of its plan to end it bancatakaful service agreement (BSA) with the insurer.
At 10.49am, Takaful was down 41 sen to RM5.29 with 2.98 million shares done in a knee-jerk reaction to the negative news.
BIMB lost five sen to RM4.35 with more than one million shares done while RHB Bank was unchanged at RM5.81.
The FBM KLCI fell 7.85 points or 0.5% to 1,577.29. Turnover was 1.04 billion shares valued at RM484.04mil. Decliners led advancers nearly two to one or 382 losers to 203 gainers while 344 counters were unchanged.
To recap, RHB Bank’ subsidiary, RHB Islamic Bank, will discontinue its BSA with BIMB’s 59% owned subsidiary Takaful upon its expiry on July 31,2020.
Maybank Investment Bank Research said the impending discontinuance of RHB Bank’s BSA with Takaful would, in a worst-case scenario, impact BIMB’s FY20/21E net profit by just 1%/4% respectively, by its estimates. It maintained its Buy on BIMB with an unchanged sum-of-parts of RM5.25.
Maybank Research said it would expect RHB to invite takaful operators to submit new proposals, and it would not preclude Takaful from vying for a new service agreement from the bank.
“By our estimates, RHB contributes to about 10%-15% of Takaful’s gross contributions. A positive scenario would be if Takaful is successful in securing a new BSA from RHB.
“Should it be unsuccessful, we estimate the impact to Takaful’s FY20E group net profit (five-month impact) to be about 4%, while a full impact would be about 12% in FY21E.
“The impact to BIMB group’s net profit would be just about 1%/4% in FY20/21E, by our estimates.
“We maintain our sum-of-parts of RM5.25 on BIMB post its restructuring exercise. This values Bank Islam at an FY20 price-to-book value (PBV) of 1.3 times (ROAE: 11.3%) and Takaful at a historical end-September 2019 PBV of 3.3 times, ” it said.