PETALING JAYA: Analysts have tweaked Affin Bank Bhd’s earnings target by a small quantum but the bank’s own target remains above their estimates.
Kenanga Research said post results, it is tweaking its financial year ending Dec 31, 2024 (FY24) and FY25 earnings by 1% and minus 1% from model updates on third quarter 3Q24 numbers, mostly due to adjustments to loan base.
“We note that our forecast for FY24 is still below the group’s target, which we opt to maintain amid a more conservative view against the group’s immediate term delivery,” it said in a report.
Affin’s nine-month FY24 results were within expectations and the group had previously aspired for better performance in funding costs, but remained pressed by the market, prompting a cut in FY24 net interest margins (NIMs), profit before tax and return on equity targets.
“Given a net credit cost guidance being maintained, we are wary of 4Q24 seeing a backloading of provisions.
“We tweaked our earnings slightly as we incorporated 3Q24 numbers, while maintaining our ‘underperform’ call and target price of RM2.20.”
The research house pointed out that while earnings were within expectations, it had anticipated for Affin’s NIMs to be stable in more organic terms (that is, without significant liability management initiatives).
Furthermore, cheaper cost of funds should have been derived with a wider current account savings accounts (CASA) mix of 26.9% (2Q24: 25.9%, 3Q23: 23.2%).
However, it would appear that for Affin’s case, the cost to maintain its non-CASA products are perhaps rising, the research house said.
“All considered, this kept Affin’s deposits base growth of 3.27% year-on-year to be in line with the industry’s 3.26% as of September.
“Although still early days in 3Q calendar year 2024 (CY24) results season, we are of the view that the conditions experienced by Affin could be isolated, given the group’s explicit mention to compete more heavily out-of-season in 3Q as opposed to 4Q for deposits,” the research house pointed out.
