Affin yet to see major contribution from Sarawak govt despite strong CASA growth
KUCHING (May 21): Affin Bank has yet to see meaningful contribution from the Sarawak government in its loans and deposits despite healthy current account savings account (CASA) growth and steady earnings, says analysts with Kenanga Research.
The research house noted that while Affin's Sarawak presence continues to strengthen through increased non-state-backed deposits, synergies from its strategic push into the state have yet to be fully realised.
'We gathered that the Sarawak state government is still not a significant component in AFFIN's loans and deposit books, suggesting that synergies have yet to be reflected,' it said in a note on Tuesday.
To recap, the bank has posted first-quarter financial year 2025 (1QFY25) net profit of RM124.1 million supported by stronger net income, which was in line with expectations and accounting for 20 per cent of Kenanga's full-year forecast and 22 per cent of the consensus forecast.
Analysts highlighted that Affin has already surpassed its full-year CASA target of 31 per cent, with deposits in Sarawak helping to offset a decline in working capital loans.
These now make up 16 per cent of the group's loan portfolio, amid uncertainties in global trade.
'This comes even before AFFIN implements payroll services to accommodate up to 30,000 civil servants in the state,' it added.
Similarly, TA Securities viewed the group's CASA performance positively with its growth driven by strong corporate flows.
'This could improve further with the potential addition of Sarawak's payroll mandate,' it said.
Kenanga Research added that a stronger relationship with the Sarawak government could serve as a key catalyst for the bank moving forward.
'Near-term catalysts could emerge from the Sarawak State Government's eventual large CASA deposits injection into Affin.
'From our own model estimates, every RM1 billion in new CASA deposits could lower cost of funds by 3 basis points and generate a return on equity (ROE) improvement of 10 basis points,' the research house added. Affin Bank Kenanga Research
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