Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on April 25, 2017

KUALA LUMPUR: Affin Holdings Bhd, the country’s second-smallest lender by assets, expects its loans and return on equity (ROE) to grow by 8% and 10% respectively this year.

It also targets for its fee-based income for the financial year ending Dec 31, 2017 (FY17) to be driven by increasing cross-selling of its products, said Affin chief executive officer Kamarul Ariffin Mohd Jamil.

“This year, our focus is to grow our fee-based income revenue, particularly by cross-selling of our products such as insurance and credit cards. This segment is very small, contributing less than 2% of the total fee income,” he told reporters after the group’s annual general meeting, which went on for nearly four hours, yesterday.

“Growth in loans will come from niche segments such as small and medium enterprises, which are less than 10% of our total loan portfolios,” he added.

Kamarul Ariffin said Affin is on track for its “Affinity 2016-2020” transformation programme to grow its ROE to 14% to 15% by 2020, from 8.5% in FY16, while targeting for its fee-based income ratio — calculated over total operating income — to increase to 25% to 30% in the next three years.

“We also plan to reduce our cost-to-income ratio, which rose after the acquisition of our investment banking unit previously,” he said.

On construction of its upcoming 43-storey tower on 1.25 acres (0.51ha) of land in Tun Razak Exchange (TRX) here, Kamarul Ariffin said: “Earthworks and preliminary construction should begin as early as next month.

“Affin has fully paid for the parcel of land and we already got the title. Progress to construct the new office is on track as of today (yesterday),” he said, noting that upon relocation to the new office, Affin expects to save RM10 million in annual rental cost that it is currently paying to its third-largest shareholder, Boustead Holdings Bhd.

In 2015, Affin announced its intention to buy 1.25 acres of land in TRX from 1Malaysia Development Bhd’s subsidiary KLIFD Sdn Bhd for RM255 million or RM4,699 per sq ft.

On a report that Affin is considering to buy a stake in an Indonesia-based lender, Kamarul Ariffin said the group will not be entering into a formal talk to buy up to 60% stake in Jakarta-listed Bank Bukopin’s Islamic subsidiary, Bank Syariah Bukopin.

“We have expressed our interest in Bank Syariah Bukopin before, but nothing concrete has materialised.

“In fact, we are not really in any formal talks with Bank Syariah Bukopin. So, [there is] nothing much that we can comment there,” Kamarul Ariffin said.

“The situation in Indonesia is such that there is a foreign ownership cap of up to 40%. Obviously this is not what we want because we would not be able to have management control,” he said. “Still, we are not shying away from Indonesia.”

Bank Bukopin president director Glen Glenardi in February this year said that it was in discussion with Affin to explore a potential divestment of up to 60% stake in Bank Syariah Bukopin.

On the plan to spread its banking wings into China, Kamarul Ariffin said Affin will shift its focus to grow its business in Malaysia and neighbouring regional markets such as Indonesia and Thailand.

“The regulatory environment in China is not so easy for the establishment. Therefore, we may not be able to mark a footprint there if the regulation is not favourable to us,” he added.

In September 2010, Affin, together with its second-largest shareholder Bank of East Asia Ltd, submitted a proposal to the China Banking Regulatory Authority to offer Islamic banking services in Mainland China.

As for banks’ valuation, Kamarul Ariffin noted that it has come down to a “realistic level”, making merger and acquisition deals more palatable.

On Affin’s proposal to buy an additional 16% stake in AXA Affin General Insurance Bhd from Felda Marketing Services Sdn Bhd, a unit of Felda Global Ventures Holdings Bhd, Kamarul Ariffin said he hopes to close the deal before the extension expires on Aug 5 this year.

“AXA Affin is an important business for us. We see value in it, and we hope to conclude the deal,” he said, noting that AXA Affin’s book value stands at RM7.85 per share.
 

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