(AHB MK/SELL/RM2.86/Target: RM2.55)

Affin’s 1Q17 results came in 8.4% below our estimates with operating cost pressure being the key drag. More importantly, asset quality deteriorated significantly while LLC fell sharply to 38%, by far the lowest in the industry. Following our earnings revision, we lower our TP to RM2.55 (0.55X 2017F P/B, 5.7% ROE) and downgrade the stock to a SELL. We are projecting a 10% yoy contraction in earnings.

Source: UOB Kay Hian Research - 29 May 2017