This article first appeared in The Edge Financial Daily, on May 25, 2016.

KUALA LUMPUR: Lower loan provision and higher loan recovery helped boost Affin Holdings Bhd’s earnings for its first financial quarter ended March 31, 2016 (1QFY16). The banking group’s quarterly net profit soared 284% to RM115.57 million, or 5.95 sen per share, from RM30.09 million, or 1.55 sen per share, in the previous corresponding quarter.

In a filing with Bursa Malaysia, Affin also attributed the better net profit to higher profit share from its associate and an increase in both net interest income and Islamic banking income.

However, the group’s investment banking arm, Affin Hwang Investment Bank Bhd, saw its pre-tax profit fall by some 27% in 1QFY16 as the previous corresponding quarter benefited from higher realised investment gains, the group said.

Its net interest income grew 2.66% to RM229.69 million in 1QFY16, which was in line with the 3% loan growth it attained in the quarter. Interest income came to RM638.32 million, up 3.29% from 1QFY15.

Affin’s Islamic banking income grew at a bigger pace of 7.2% year-on-year to RM58.93 million, from RM54.97 million a year earlier.

The group made a write-back of RM1.58 million of impairment losses on loans, advances, and financing — substantially lower compared with RM124.12 million a year ago.

In a separate statement, Affin said it achieved an annualised loan growth rate of 3% during 1QFY16, mainly in the segments of syndicated term loans, business term loans, housing loans and hire purchase loans.

However, Affin’s loan loss coverage ratio including the regulatory reserves fell to 93.6% as at end-March 2016, from 98.1% in December 2015. Its gross impaired loans ratio also ticked up by eight basis points from end-2015 to 1.98% on March 31 this year.

“As at March 31, 2016, the Total Capital ratio, Common Equity Tier-1 Capital ratio and Tier 1 Capital ratio of all banking entities within the group were healthy and well above regulatory requirements in line with Bank Negara Malaysia’s Capital Adequacy Framework, a reflection of Affin’s financial strength,” Affin said in the statement.

Going forward, Affin said its commercial banking business will focus on both retail and business segments in order to pursue the opportunities available in the domestic economy, “which despite the softer economic growth outlook, still holds the prospects for business growth”.

Given the prevailing soft and restricted capital markets, Affin said it remains cautiously optimistic about the growth prospects for its investment banking business for the rest of 2016. It plans to work closely within the banking group and its regional partners, Daiwa Securities Group and Thanachart Securities, to further develop business prospects and realise potential synergies.