PETALING JAYA: Affin Bank Bhd foresees the possibility of further tapering of loan growth in financial year 2024 (FY24) to mitigate potential risks associated with the ongoing macro challenges.
Its focus will continue to be intensified towards monitoring asset quality and ensuring sufficient buffers over its loan and financing exposures.
Affin Bank’s total assets remained in excess of RM100bil, on track with its A25 transformation plan, said TA Research.
The group will also be looking to scale up in high-margin businesses and fee-based income such as foreign exchange (forex), bancassurance, wealth management and trade, it said.
Hong Leong Investment Bank (HLIB) Research expects net interest margin (NIM) to widen in the fourth quarter of 2023 (4Q23), given the redemption of expensive sukuk in October this year.
It still expects credit growth to taper due to the soft macro environment coupled with base effect.
However, the research house is not overly worried about any asset quality weakness as it believes Affin Bank is better equipped versus prior slumps.
Questionable NIM outlook due to high loan growth, leading to dual issues of exacerbated liquidity constraints typical of a smaller banking franchise (forcing higher fixed deposit rates) and asset yield dilution coming from voluminous lower-yield loan acquisition can be expected, said MIDF Research.
It expects lumpy provision in 4Q23 while FY24 non-cash charge outlook is not great either, when coupled with asset quality uncertainties, it added.
UOB Kay Hian Research said the significant reduction in provisions for bad loans (minus 91%) played a crucial role in Affin’s return to profitability.
Despite a 6% decline in total income for 3Q23, attributed to a contraction in NIM by 77 basis points, this was offset by a substantial increase in non-interest income, which doubled.
The strength in treasury and forex-related gains effectively cushioned the impact on overall income, it added.
