Affin Bank's 1HFY24 results aligned with expectations, revealing a net profit of RM228.8 million, which represented 47% of both full-year forecasts and consensus estimates. While loans grew by 11% year-on-year, largely driven by mortgages, net interest margins (NIMs) faced pressure, declining to 1.42% due to high funding costs. This led to a 3% drop in net interest income (NII) and a 13% decrease in net earnings, impacted by higher personnel costs and IT investments.
Analysts at Kenanga and MIDF have maintained an UNDERPERFORM and maintain SELL rating for Affin Bank. The target price remains unchanged at RM1.80 and RM 1.82 respectivel, reflecting concerns over persistent NIM compression and asset quality issues. Analysts project further pressure on NIMs and anticipate downward revisions to FY24 targets due to ongoing challenges.
The bank's asset quality concerns are evident with a rise in gross impaired loans (GIL) to 1.42%, above the industry average. Management is anticipated to be more selective with SME acquisitions and deposits, possibly leading to slower growth. Despite these issues, the Sarawak State Government's entry into Affin remains a key focus, though its completion has been postponed to the end of FY24.