PETALING JAYA: Affin Bank Bhd
is expected to deliver another quarter of healthy loan growth in the third quarter of its financial year ending Dec 31, 2026 (3Q26), although tighter margins and rising credit costs could weigh on earnings, according to TA Research.
Following a recent meeting with the bank’s management, the research house said Affin Bank’s loan growth remained robust through 3Q26 with full-year growth expected to reach about 12%, surpassing its initial target of 10%.
TA Research said existing loan pipelines are also sufficient to sustain the momentum through the remainder of the financial year.
In addition, management noted the deepening intensity of deposit competition, which has developed into an industry-wide price war across both retail and wholesale funding.
This has resulted in elevated deposit pricing, with banks increasingly competing on rates to defend existing relationships and attract new funding.
“Against this backdrop, management expects further quarter-on-quarter (q-o-q) net interest margin (NIM) compression in 3Q26, following a seven-basis-point (bps) contraction to 1.47% in 2Q26.
“Recall that NIM contracted by seven bps q-o-q to 1.47% in 2Q26. We believe this is likely to remain a key near-term earnings headwind, particularly as competition for deposits typically intensifies towards year-end.”
The research house said pricing discipline should help contain further margin erosion.
Management also noted that Affin Bank has adopted a more proactive funding strategy, having accumulated longer-tenor deposits to reduce its exposure to aggressive year-end deposit pricing.
“We note that Affin Bank is currently offering an eight and 12-month fixed deposit promotion at rates of 3.9% and 3.93%. On the lending side, the bank has become more disciplined in pricing certain consumer loan products, including mortgages and hire purchase loans.
“For instance, indicative mortgage rates are now some 15 to 20 bps higher year-on-year.”
According to the research firm, asset quality will be another key area of focus in the upcoming results.
It said management highlighted mounting repayment stress among retail borrowers, particularly lower-income households grappling with rising living costs and energy prices.
Mortgages, hire purchase and credit cards have been identified as areas of concern, while small and medium enterprises are also facing weaker operating conditions and growing competition from Chinese eCommerce platforms.
