This article first appeared in The Edge Financial Daily, on April 19, 2016.
KUALA LUMPUR: Affin Holdings Bhd, the country’s second-smallest lender by assets, is expecting to deliver a better financial performance for the financial year ending Dec 31, 2016 (FY16), as it doesn’t expect to make huge impairment provision and incur costs for voluntary separation scheme (VSS) cost.
The group also targets to generate more income from fee-based activities, increasing its contribution to total income to 30% by FY17, from 25% currently, in an effort to mitigate net interest margin compression.
“We expect FY16 would be a better year for us as we do not have to incur significant impairment and VSS costs like last year. We [also] hope to increase [our fee-based income] to 30% to be on par with the whole industry,” Affin chief executive officer Kamarul Ariffin told a media briefing after the group’s annual general meeting (AGM) yesterday.
However, Kamarul warned that Affin is still vulnerable to the subdued economic conditions in FY16.
The VSS, which saw about 100 employees laid off from its 5,500 staff, cost the group RM16 million last year.
Affin also incurred allowances for impairment losses on loans, advances and financing of RM188.38 million in FY15, dragging the group’s net profit down by 38% to RM369.27 million from RM592.68 million in FY14.
“We [are] also aware that economic growth is slowing as the government forecast GDP (gross domestic product) growth would be moderated to about 4.5% this year,” he said.
Kamarul said Affin’s loan growth for FY16 is likely to remain flat at 7% as the banking sector is exposed to external shocks. It registered a loan growth of 6.9% to RM43.88 million in FY15 against RM41.06 million in the previous year.
On the group’s acquisition of additional stake in AXA Affin General Insurance Bhd (AAGI), Affin executive director Lee Yoke Kiow said the group had not finalised the price and number of shares to be acquired at this juncture, adding that the details require further approval from Bank Negara Malaysia.
“It is still preliminary to discuss this matter. As to why we are increasing our stake, it is because Affin was approached by one of the minority shareholders of AAGI for the acquisition,” she revealed, but declined to elaborate.
Earlier in the AGM, Affin shareholders expressed their concern about the group’s purchase of a 54,266-sq ft piece of land in the Tun Razak Exchange here for RM260 million.
Affin chairman Tan Sri Mohd Zahidi Zainuddin explained that the acquisition is beneficial not only because the location is deemed strategic, but also due to an annual rental saving of RM26 million for the group.
“We are operating in seven places now (excluding bank branches). We are renting all of them, costing us about RM26 million, so in the long term, the acquisition will benefit us through rental saving,” he said, adding that the construction cost of its new headquarters is estimated at RM300 million.
Affin shares closed up one sen or 0.43% at RM2.34 yesterday, valuing it at RM4.55 billion.