PETALING JAYA: Affin Bank Bhd
’s near-term outlook remains cautious, as its performance heavily depends on macro and geopolitical stability, analysts say.
The banking group recently posted RM135.5mil in core earnings for the first quarter of financial year 2026 (1Q26), up 6.2% quarter-on-quarter and 9.2% year-on-year, which was broadly within market expectations.
Despite the headwinds, Hong Leong Investment Bank (HLIB) Research in a report said Affin Bank’s net interest margin (NIM) expansion is projected to recover toward its 1.5% target.
This will be anchored by ongoing current account and saving account (Casa) mobilisation, though aggressive domestic deposit competition will likely keep funding costs elevated, the research house added.
Long-term growth momentum also remains solid for now, but could taper off should geopolitical uncertainties extend beyond June.
This could potentially delay corporate pipelines and deal conversions.
According to HLIB Research, Affin Bank’s asset quality warrants closer monitoring against a backdrop of emerging SME and non-retail stress, keeping provisioning prudent with a financial year 2026 (FY26) credit cost target of 30 basis points (bps).
That said, earnings visibility should be anchored by non-interest income (NOII) growth, fuelled by stronger fee income amid structural improvements.
HLIB Research has also lowered its FY26 and FY27 earnings projections by 2.2% and 12%, respectively.
It maintained a “buy” call on the stock at a lower target price of RM3 per share.
HLIB Research said the premium remains justified.
This is because “this reflects a robust loan and deposit pipeline following the Sarawak government’s emergence as the largest shareholder, enhancing Affin Bank’s strategic positioning and alignment with the state’s developmental agenda.”
In a note to clients, Kenanga Research said it tweaked its FY26 to FY27 earnings forecasts for Affin Bank lower by 2% each post-1Q26 model updates.
It said: “While we remain conservative on Affin Bank’s longer-term earnings delivery due to past volatilities, our 6.25% return on equity (ROE) incorporates more positive projections, and we will wait to assess more initiatives and execution, particularly in relation to its Sarawak-led initiatives.”
The group is also reviewing its AX28 programme, which initially targeted a 2% ROE by FY28.
In addition, Affin Bank is due to enjoy a capital uplift of 10 to 30 bps to its common equity tier-one ratio from the upcoming Basel III implementation.
The brokerage has kept a “market perform” rating on Affin Bank with a target price of RM2.50 per share.
Meanwhile, MBSB Research expects a possible exacerbation of problems in later quarters.
“Our main concerns are asset quality issues and elevated provisioning, with NIM and loan growth outlook also subject to some pressure,” it said in a report yesterday.
While Affin Bank is taking a wait-and-see approach to the Middle East conflict, MBSB Research said it expects several FY26 targets to be cut regardless.
The brokerage maintained a “neutral” call on the stock with an unchanged target price of RM2.39 per share.
