Affin prepared to face challenging times
> Expects slower loan growth, compression in net interest margin
KUALA LUMPUR: Affin Holdings Bhd, which operates Affin Bank, expects slower loan growth of 8% for 2015 and foresees a five- to 10-basis point (bps) compression in net interest margin (NIM) ranging between 2.4% and 2.45%.
Last year, Affin’s NIM was down 14 to 20 bps to 2.5% on the back of 9% loan growth.
However, its newly appointed managing director and CEO Kamarul Ariffin Mohd Jamil said NIM could be enhanced via better pricing and the diversification in cost of funds .
In a bid to get lower cost of funds, he said, the group is looking to grow its current account saving account (CASA) segment.
“CASA remains a small component of our retail segment, we’ll like to grow that further. At the moment the significant portion of our retail deposit base is very much the more expensive FDs (fixed deposits) and term deposits.
“If we can grow our CASA segment substantially, then we can help address our cost of funds and provide the diversification in terms of retail deposit base,” Kamarul Ariffin told reporters after Affin’s AGM here yesterday.
He cautioned there will still be a lot of competition in the deposits front, especially with the liquidity challenges expected within the next two years.
“Perhaps at a lesser extent to what we’ve seen before, maybe 5 to 10 bps compression in NIM, but if our strategy works well, you may not see (any compression).”
Kamarul Ariffin said the group is rebalancing its loan portfolio, with a 50:50 target for consumer and corporate loans respectively within the next three years, compared with the current 42:58.
“We are already big in hire purchase, and we want to grow our mortgage segment,” he added.
Due to a slowdown in economic growth at home, Affin deputy chairman Tan Sri Lodin Wok Kamaruddin said, the group is reviewing its plans to expand regionally.
“We’re reviewing our interest to go regional in the immediate term, instead we’re trying to consolidate our position to see how to strengthen cost efficiency and introduce new products to unlock value,” he noted.
Affin aborted its plans to buy as much as 24% of Indonesia’s Bank Panin Syariah last year after the emergence of Dubai Islamic Bank PJSC as Bank Panin Syariah’s substantial shareholder.
Besides that, Affin had in 2012 called off its plan to buy PT Ina Perdana was called off in 2012, due to the restrictions imposed by the Indonesian authorities to cap the foreign shareholding to 40%.
Lodin, however, stressed that Asean still offers huge opportunities.
On another note, Kamarul Ariffin did not specify whether there are any plans to grow its Islamic banking segment, except to say it is a strategic issue and the group is keen to realise its value.
Affin reported a 6.92% drop in net profit to RM605 million for the financial year ended Dec 31, 2014 from RM650 million in the year before that.