Deposit costs to buoy Affin Bank
PETALING JAYA: Affin Bank Bhd 's net interest income (NIM) is expected to remain resilient in the lender's upcoming second quarter (2Q25) earnings announcement, analysts say.
Affin's NIM is expected to be underpinned by a solid loan base, said Hong Leong Investment Bank Research (HLIB Research).
Despite some churn, the research house said Affin's loan pipeline remains robust at about RM9bil.
'Concurrently, 2Q25 NIM is expected to remain stable sequentially as proactive cost of funds optimisation efforts are set to largely offset any asset yield pressure from loan competition.
'Meanwhile, with the yields for 10-year Malaysian Government Securities currently still below 3.5%, there's significant room for Affin to capitalise on favourable trading opportunities,' HLIB Research said in a report.
HLIB Research also expects the bank's gross credit cost to remain stable, supported by steady asset quality. Additionally, improved recovery momentum should help keep net credit costs within single digits for this financial year (FY25).
'We maintain our 'buy' rating on Affin, with an unchanged target price of RM3, implying a 0.60 time FY26 price-to-book value.
'We believe the bank is on the cusp of a notable enhancement in profitability, primarily driven by a fundamental shift in its funding mix, alongside a robust loan pipeline and enhanced operational efficiencies, which are set to drive return on equity.'
The research house said while sector-wide asset yields have gradually declined, Affin's primary challenge and significant opportunity lie in managing its cost of deposits.
It said liquidity following the cut in the Statutory Reserve Requirement could partially offset the impact of the recent 25 basis points (bps) cut in the overnight policy rate (OPR) .
Deposit competition is easing and Affin is expected to benefit from an increase in low-cost current account and savings account deposits, driven by inflows from Sarawak, the bank's major shareholder.
This is estimated at around RM130mil per month by 3Q25.
According to HLIB Research, this allows the bank to shift from costly promotional rates for deposits to lower-cost payroll-based accounts, helping build a more stable and cheaper funding base.
'Interestingly, our tracker on retail fixed deposit (FD) promotional rates showed that after the 25bps OPR cut on July 9, Affin aggressively slashed its FD promotional rates by between 35bps and 50bps, whereas peers only cut up to 25bps.
'This steeper reduction suggests a deliberate strategy, likely driven by the anticipation of cheaper funding sources coming online, which enables Affin to reduce reliance on higher-cost deposits,' the research house said.
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