PETALING JAYA: Affin Bank Bhd is charting a course for growth with plans to increase its branch network, targeting 146 branches by the end of 2025 and 180 by 2028 from 130 in 2024.
The bank’s management shared this vision during the recent CGS International (CGSI) Malaysian Corporate Day, highlighting its commitment to enhancing geographical coverage in Penang, Johor, Sarawak, and Sabah.
CGSI Research noted that this strategy aims to bolster loan and fee income growth over the long term. However, it cautioned that the expansion comes with costs.
“The other side of the coin is that the bank will have to bear the additional recurring operating costs of the new branches, even before a meaningful inflow of new loans and fee income,” the brokerage wrote in its report yesterday.
As a result, Affin Bank’s cost-to-income ratio (CIR) is expected to remain elevated, estimated at 65%-68% in 2024-2026, an improvement from 71.6% in 2023 but still above the sector average of 45%-50%.
The bank’s ongoing AX28 transformation programme underpins its broader ambitions, CGSI Research noted.
Under the programme, Affin Bank aims to achieve a pre-tax profit of RM1.8bil by 2028, representing a compound annual growth rate (CAGR) of 37% from 2024. It has also set an aggressive target of attaining a return on equity (ROE) of 12%, tripling its 4% ROE in 2023.
CGSI Research, however, adopted a more cautious outlook, forecasting a pre-tax profit of RM900.8mil and ROE of 5.5% for the same period.
“Under its AX28 transformation programme, Affin Bank has set aggressive financial targets to be achieved by 2028,” CGSI Research stated, adding that these include a current account savings account ratio of 35%, total loans of RM116bil, and deposits of RM123bil.
The AX28 programme is built on five pillars: developing a private banking business for the top 20% income group, launching a new digital banking platform with RM400mil in capital expenditure, increasing presence in Penang, Johor, Sarawak and Sabah, improving capital efficiency to raise ROE, and expanding environmental, social and governance-related financing to account for 25% of the loan book by 2028.
Despite these ambitions, CGSI Research maintained a cautious stance, reiterating its "reduce" call on Affin Bank.
“We regard the stock as overvalued as its 2025 price-earnings ratio of 13.3 times is the highest in the sector,” it said.
The research house retained its dividend discount model-based target price of RM2.76, citing potential downside risks such as elevated CIR and weak ROE in the near term.
Nonetheless, CGSI highlighted potential upside risks, including stronger net interest margin and fee income growth in 2025-2026, which could enhance the bank’s financial performance.
