KUALA LUMPUR (Aug 18): Despite another weaker-than-expected quarter, Affin Bank Bhd’s (KL:AFFIN) prospects remain bright, and the recent share price decline has also raised its appeal, analysts said.
Net income for the financial services firm’s first six months made up 46% of the consensus full-year forecasts, and the company was behind in some of its own financial targets as well. Still, at least two research houses upgraded the stock following the results announcement on Friday.
CGS International, which turned bullish on the stock, expects the bank's earnings to expand 15% next year after staying flat this year, driven by solid net interest income growth and above-industry loan growth.
Shares of Affin Bank, one of the country’s smallest listed lenders, dipped slightly on Monday. The stock has declined more than 13% so far this year, underperforming its larger peers and the broader market after two quarters of underwhelming results.
There are now four ‘buy’, four ‘hold’, and two ‘sell’ calls on the stock. The average target price is RM2.68, according to Bloomberg, implying a nearly 13% gain in the next 12 months from the current share price.
“We continue to find Affin’s risk-reward profile skewed positively to the upside, especially seeing its share price has fallen,” said Hong Leong Investment Bank, which kept the stock on ‘buy’ call.
Fundamentally, the prospects are bright, backed by a robust lending pipeline to sustain its faster loan growth trajectory as well as “tangible levers” to scale up its current account-savings account franchise with a “clear pathway” for better net interest margins, the research house said.
On its part, Affin Bank told a post-earnings briefing that it may revise its target for this year at the next quarterly results announcement in November, trailing behind its return-on-equity target of 6% and loan growth target of 12%.
For its first six months, return on equity was 4.5% while loan growth came in at only 7% and gross impaired loans — the size of bad debt as a percentage of total loans — was higher at 1.83% versus its target of 1.7%.