KUALA LUMPUR: Kenanga Research has maintained its underperform call on Affin Bank Bhd with a target price of RM1.30 per share.
The research house said Affin has mapped out strategies to help address previous concerns but progress will not happen overnight.
“Execution is key and we would not be surprised if the tough operating environment throws a spanner into the works.
“Near-to-mid term, we remain concerned of its high exposure to the corporate segment (higher asset quality risk), low limited liability companies and significant Day One modification loss impact,” it said in a research note today.
Affin’s high-level focus includes re-engineering the balance sheet by raising asset yields, lowering deposit cost and being more capital efficient, to continue its focus on the current account, savings account from improved cross-selling efforts and digital offering, among others, said Kenanga.
“As pointed out by its management, all these will take time, although we would not be too surprised if the current economic situation pushes the time frame to achieve some of these targets further out,” said the research house.
On loan moratorium, approximately 95% of the eligible small and medium enterprises, as well as retail customers and 50% of Affin’s corporate customers, have taken up the moratorium while the sectors that have applied for it vary from hospitality to retail to the auto dealership, among others, it said.
“We note that the proportion of its corporate customers that have taken up the moratorium seems higher than peers (Maybank’s was at 26%),” it said.
Kenanga added that Affin had also highlighted that after taking into account the decrease in the Statutory Reserve Requirement, where the proceeds were reinvested into interest yielding instruments, the net impact to net interest income would be a more manageable RM70 mil. – June 2, 2020, Bernama
