CEO Morning Brief

Affin Bank’s Expansion Plan Will Keep Costs High, Says CGS

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Publish date: Thu, 16 Jan 2025, 09:56 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 15): Affin Bank Bhd’s (KL:AFFIN) ambitious branch expansion plan is expected to keep its cost-to-income ratio (CIR) elevated for the next few years, according to CGS International, which is reiterating its ‘reduce’ recommendation on the bank.

In a research note on Wednesday, CGS said Affin plans to expand its branch network from 130 in 2024 to 146 by the end of this year, and to 180 by 2028, with the additions to be focused particularly in Penang, Johor, Sabah and Sarawak.

While the expansion is expected to lead to stronger loan and fee income growth in the longer term, the bank will have to bear additional recurring operating expenses before realising substantial new revenue.

“With this, we estimate its CIR could remain elevated, at above 60% to 70% in the next two to three years, higher than the sector average of around 45% to 50% over the same period. We project its CIR to stay high at 65% to 68% in the financial year ended Dec 31, 2024 (FY2024)-FY2026, although this would be an improvement from the 71.6% recorded in FY2023,” said CGS.

It also noted that Affin has set aggressive financial targets for FY2028, including a pre-tax profit of RM1.8 billion (a 37% compound annual growth rate from FY2024 to FY2028), and a return on equity (ROE) of 12%, triple the 4% that the bank achieved in FY2023.

Source: TheEdge - 16 Jan 2025

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