KUALA LUMPUR (Aug 17): Affin Holdings Bhd’s net profit increased 29.8% to RM138.4 million or 7.17 sen per share for the second quarter ended June 30, 2015 (2QFY15) from RM107.4 million or 7.19 sen per share a year ago, largely on higher interest income.

Revenue, however, declined 4.3% to RM447.1 million from RM467.1 million last year, according to the group’s filing to Bursa Malaysia today.

For the six months (1HFY15), net profit dropped 32.2% to RM169.5 million or 8.72 sen a share from RM250.1 million or 16.73 sen a share last year, mainly on higher allowance for loan impairment (net of recoveries), higher overhead expenses and lower net interest income.

Meanwhile, its 1HFY15 revenue increased 6.9% to RM896 million against RM838.2 million last year.

The group’s after tax return on equity (ROE) and after tax return on assets (ROA) were 2.1% and 0.3% respectively for the six months under review.

As at June 30, 2015, its loan to deposits ratio from customers (LD) was at 84.9%, while consumer deposits to total deposits ratio stood at 28.4%.

Gross impaired loan ratio stood at 2.04% as at June 30, 2015, down eight basis points from 31 March 2015, Affin added.

Meanwhile, Affin’s commercial banking arm Affin Bank Bhd (ABB)’s profit before tax (PBT) for 1HFY15 came in at RM176.7 million, down 42.2% from RM305.6 million in 1HFY14, mainly due to higher allowance for loan impairment, lower loan recovery, and lower net interest income.

ABB’s wholly-owned unit Affin Islamic Bank Bhd registered a PBT of RM51.9 million, up 23.3% from RM42.1 million last year, mainly due to higher operating income and lower overheads.

However, its investment banking arm Affin Hwang Investment Bank Bhd registered a lower PBT of RM39.8 million for 1HFY15 versus RM53.2 million last year, due to increase in overhead expenses.

The group’s earnings was dragged by its insurance segment, AXA Affin Life Insurance Bhd (AALI) saw a pre-tax loss of RM5.4 million in 1HFY15 compared with RM2.5 million in 1HFY14, mainly due to a one-off change to strengthen reserves for future policyholders liabilities.

Its 34.51%-associate, AXA AFFIN General Insurance Bhd (AAGI), however, reported a PBT of RM71.5 million for 1HFY15, up 43.9% from RM49.7 million last year.

Moving forward, Affin said the current economic climate and the uncertainty in the global economic outlook are expected to impact the group’s commercial banking arm and the banking sector in general.

“Increase in funding costs as well as a tapering in profit margin are expected in the second half of 2015, mainly due to strong competition among domestic banking facilities for both deposits as well as consumer markets,” it said.

Affin (fundamental: 1.1; valuation: 2.25)’s counter closed 15 sen or 6.6% lower at RM2.11 for a market capitalisation of RM4.1 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)