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AFFIN (5185) AFFIN HOLDINGS BHD Bank posts solid nine-month performance, says Kenanga Research

Affin Bank Bhd’s core net profit during the nine-month ended September 30, 2021 (9MFY21) came in above Kenanga Research and consensus expectations.

KUALA LUMPUR: Affin Bank Bhd's core net profit during the nine-month ended September 30, 2021 (9MFY21) came in above Kenanga Research and consensus expectations.

Kenanga Research said the variance to its forecast was due to faster-than-expected loans and net interest income (NII) expansion for the group, lower-than-expected impairments and better associate performances.

For 9MFY21, Affin Bank's net profit rose 33.5 per cent to RM320.09 million from RM239.69 million, as revenue climbed 1.8 per cent to RM1.67 billion from RM1.64 billion.

"The results have beaten our/consensus estimates, making up 99 per cent/88 per cent of respective full-year expectations," Kenanga Researc said in a report today.

The research house said the solid results could also be a translation of Affin Bank's financial year 2022 (FY22) targets on improved income streams and optimised operating controls.

"From our previous engagement with management, several ambitious targets have been set for FY22, specifically a pre-tax profit for more than RM1.0 billion.

"This will leverage enhanced channels to boost its wealth management businesses with better insurance contributions from the Generali venture (to be completed by the first half of FY22).

"Improving demand for loans from the ongoing economic reopening will also help," it said.

Kenanga Researchbsaid Affin Bank was hopeful of  keeping its net interest margins (NIM) manageable by capturing a larger retail share with the help of digital platforms.

"Amid enlarged income streams, management hopes that efforts to keep costs stable would translate to significant improvements to cost-to-income ratio (CIR) readings," it added.

Kenanga Research raised its FY21/FY22 earnings forecasts on Affin Bank by 29 per cent/17 per cent respectively.

The firm also improved its loan growth assumptions from 6.0 per cent/2.0 per cent to 9.0 per cent cent/4.0 per cent, lowered credit cost assumptions for FY21 earnings from 59 basis points (bps) to 52 bps and improved associate performances.

"That said, our assumptions for FY22 still lags behind management's pre-tax profit target as we are still wary on the strength of non-interest incomes going forward, as trading sentiment remains tepid which could affect the take- up of wealth management products.

"We upgraded Affin Bank to 'market perform' with a higher target price of RM1.55 from RM1.40," it added.


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