This article first appeared in The Edge Malaysia Weekly on February 24, 2020 - March 1, 2020

THERE are interesting developments brewing at the Affin banking group, with a leadership change imminent at Affin Bank Bhd and Affin Hwang Capital.

According to at least three sources, Affin Bank’s group CEO, Kamarul Ariffin Mohd Jamil, will be leaving once his contract expires at end-March, after five years in the bank’s driving seat.

“He was notified not too far back that the contract would not be renewed,” one of the sources tells The Edge.

An outsider will be brought in to take his place. Talk in banking circles is that it may be Datuk Mohd Zamree Mohd Ishak, who is president and CEO of Credit Guarantee Corp Malaysia Bhd (CGC). However, there are also other candidates from CIMB Group Holdings Bhd and Khazanah Nasional Bhd, sources say.

Affin Bank did not respond to requests for comment.

The change in leadership comes following Datuk Agil Natt’s appointment as the new chairman of Affin Bank on Nov 8 last year. Industry sources say Agil, a former banker with vast experience in corporate and investment banking as well as Islamic finance, was brought in to execute a much-needed shake-up at the bank.

The bank, controlled by Lembaga Tabung Angkatan Tentera (LTAT), has the lowest return on equity — a measure of profitability — in the industry. At around 5.5%, it is about half the industry average.

“The bank is not performing as it should. Agil is a no-nonsense guy and is quite dynamic as a chairman. He’s made a lot of changes at CGC and will likely do the same at Affin Bank,” the CEO of a commercial bank tells The Edge. It is understood that Agil goes in to the office on a daily basis at Affin Bank.

The reason many see Mohd Zamree as a strong contender for the CEO role is that, in addition to working closely with Agil at CGC — Agil is also the chairman of CGC — he also worked with him at Malayan Banking Bhd. However, some say he is unlikely to move from CGC as his services are still needed there.

Meanwhile, sources say there will also be a new group managing director at Affin Hwang Capital (AHC) to replace Datuk Maimoonah Hussain, who retired last November. AHC houses the Affin group’s investment banking, securities and asset management businesses. Maimoonah had also been group MD of Affin Hwang Investment Bank.

Shortly before Maimoonah left, AHC hired Nomura’s Kit Weng Yip as its deputy group MD, and it was widely expected that Kit would eventually replace her.

However, this may no longer be the case. Speculation is rife that another outsider will be brought in to helm AHC and the investment bank. It is unclear who this is but the rumour going around is that it may be Mona Suraya Kamaruddin, who is currently the head of cash equity sales at Nomura Securities Malaysia.

Industry sources say there will be more people-changes at the Affin group over the next few months, and not just at CEO level.

“It is starting with a leadership change as they are looking for fresh ideas to take the bank forward,” one source comments.

Affin Bank has been one of the weaker-performing banks in recent times. Critics say, as the second-smallest of eight banking groups by assets, it needs to deep-dive and find its niche to make itself more relevant in the highly competitive and capital-intensive world of banking.

It made a net profit of RM365.66 million in the nine months of the financial year ended Dec 31, 2019, up a slight 1.76% from a year ago, which came in below analysts’ expectations. The profit made up only 65.2% of an analyst consensus estimate for the full year.

Its gross impaired loans ratio — an indicator of asset quality — stood at 3.43% as at the third quarter of last year, the highest among local lenders and far higher than the industry’s under-2%.

Observers wonder if the upcoming leadership changes signal deeper changes ahead for the group.

“There is a very obvious need to make a change at the group as its performance has not been great. But is there also some move afoot to change the ownership of the bank — that is the question. If so, that will affect LTAT quite dramatically as Affin Bank is one of its flagship companies,” an industry source comments.

Last week, Bloomberg reported that Singapore’s Great Eastern Holdings Ltd and Italy’s Assicurazioni Generali SpA were eyeing the life and general insurance business owned by Affin Bank and France’s AXA SA.

And on Feb 3, The Edge reported that rivals were eyeing the group’s asset management business, Affin Hwang Asset Management Bhd. At least one, namely Maybank, has already expressed interest, although it is still at the preliminary stages, it said, citing a source.

Bloomberg data shows that of eight analysts that track Affin Bank’s stock, five have a “hold” call on it, two a “buy”, and one, a “sell’’. The average 12-month target price was RM2.04. The stock, which shed 20.3% over a year, closed at RM1.84 last Friday.

“Affin Bank is still very much a bank in transition as it progressively implements features and systems to better compete in the retail and commercial market. Given the need for these initiatives to ramp up, we do not foresee any significant improvement to the group’s earnings prospects in the near term especially under a difficult market environment,” says AllianceDBS Research in a Nov 29 report, following the release of the bank’s third-quarter results.

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