KUALA LUMPUR (Nov 22): Affin Bank Bhd (KL:AFFIN) on Friday cut some of its key financial expectations for the full year even as net profit surged in the third quarter, as the company continues efforts to improve profitability.

The company now expects profit-before-tax (PBT) of RM750 million for the full year compared to RM1 billion as previously budgeted, according to its third-quarter financial presentation. Return on equity, meanwhile, will come in at 5% instead of 7%.

Net interest margin (NIM) — a measure of profitability from interest charged on loans after paying returns on deposits — will expand at a slower pace of 1.4% from the initial projection of 1.6%.

Efforts are ongoing to improve NIM through the growth in high-yielding assets, current-account-savings-account strategies and balance sheet management, Affin said. “Business focus on high quality credits has narrowed NIM margin, while competitive deposit war continues,” it noted.

For the first nine months, Affin’s PBT came in at RM494.7 million while return on equity was 4.4%. NIM was 1.33% as of end-September.

The company also guided for higher-than-expected cost-to-income at 74% versus 64% initially, as the ratio stood at 74.6%. Affin, however, kept its target for loan growth at 8%, and for gross impaired loan — debts deemed unrecoverable as a percentage of total loans — at 1.90%.

Banks in Malaysia have been grappling with pressure on their NIM amid intense competition for deposits in a market where three dozen foreign and local lenders jostle for business.

Affin is betting on the entry of the Sarawak state as a shareholder, which will allow the bank to participate in the state’s economic growth.

“We look forward to a bigger participation in the loan growth and deposit flows from Sarawak,” the company said.

Net profit for the three months ended Sept 30, 2024 (3QFY2024) was RM145.82 million, up 45% from the same quarter in 2023, Affin said in an exchange filing. Year-on-year, net interest income for the quarter rose 27% while net fee and commission income climbed 31%.

The bank also booked larger writeback of credit impairment losses of RM66.2 million and higher net foreign exchange gains of RM75.2 million during the period.

No dividend was declared for the quarter.