Affin braces for challenging conditions

KUALA LUMPUR: Affin Holdings Bhd, which operates Affin Bank, expects a slower loan growth of 8% for 2015 and foresees a five to 10 basis points (bps) compression in net interest margin (NIM) ranging between 2.4% and 2.45%.
Last year, Affin's NIM was down 14 to 20 bps to 2.5% on the back of 9% loan growth.
However, its newly-appointed managing director and CEO Kamarul Ariffin Mohd Jamil said NIM could be enhanced via better pricing and the diversification in cost of funds .
In a bid to get cheaper cost of funds, he said the group is looking to grow its current account saving account (CASA) segment.
"CASA remains to be small component of our retail segment, we'll like to grow that further, at the moment the significant portion of our retail deposit base is very much the more expensive FDs (fixed deposits) and term deposits.
"If we can grow our CASA segment substantially, then we can help address our cost of funds and also provide the diversification in terms of retail deposit base," he told reporters after the company's AGM here yesterday.
Nevertheless, Kamarul Ariffin cautioned that will still be a lot of competition in the deposits front, especially with the liquidity challenges within the next two years.
"Perhaps at a lesser extent to what we've seen before, maybe 5 to 10 bps compression in NIM, but if our strategy works well, you may not see (any compression)," he said.
Meanwhile, he said the group is balancing its loan portfolio, with a 50:50 target for consumer and corporate loans respectively within the next three years, compared with the current 42:58, due to better capital and opportunities in the consumer front.
"We already big in hire purchase, we want to grow our mortgage segment," he added.
Due to a slow down in economic growth at home, Affin deputy chairman Tan Sri Lodin Wok Kamaruddin said the group is reviewing its plans to expand regionally.
"The plan to go regional is very much there, but there is a concern of the development of our own economy…We're reviewing our interest to go regional in the immediate term, instead we're trying to consolidate our position to see how to strengthen cost efficiency and introduce new products to unlock value," he noted.
Affin aborted its plans to buy a much as 24% stake in Indonesia's Bank Panin Syariah last year after the emergence of Dubai Islamic Bank PJSC as Bank Panin Syariah's substantial shareholder.
Besides that, Affin had in 2012 called off its plan to buy PT Ina Perdana was called-off in 2012, due to the restrictions imposed by the Indonesian authorities to cap the foreign shareholding to 40%.
Lodin however stressed that the Asean region still offers huge opportunities, with any acquisitions depending on suitable partners and good timing.
On another note, Kamarul Ariffin didn't specify whether there is any plan to grow its Islamic banking segment, except to say it is a strategic issue and the group is keen on realising the its value.
"We're looking at various areas to enhance the group's value, I can't divulge what's the plans are, but it is our intention to push the group towards strategic direction," he added.
Affin reported a decrease of 6.92% in net profit to RM605 million for the financial year ended December 31, 2014 compared with RM650 million it made a year ago.