Net Interest Expansion and Potential Special Dividend Makes Affin Bank Attractive

CGS CIMB has upgraded Affin Bank Bhd from Hold To Add given Affin’s CY23F P/E fell from 7.9x on 30 May 22  to 7.3x on 19 Jul 22.

It said that the potential re-rating catalysts include the net interest expansion and potential special dividend (subject to BNM’s approval)

Following a meeting with the management of Affin Bank by CGS CIMB, the stockbroking firm said that the positive takeaway from Affin Bank’s meeting is its robust loan growth of 12% and 7 bp net interest margin (NIM) expansion, which could lead to a strong FY22 net interest income (NII)growth.

It said that Affin expects the proposed disposal of its stake in Affin Hwang Asset Management (AHAM) (to be completed by end-Jul 22) to increase its common equity Tier-1 (CET1) capital ratio from 13.9% at end-Mar 22 to circa 16%.

 As this would be higher than the CET1 capital ratio of 15.1% for the industry, we see the possibility of Affin paying out some of the AHAM divestment proceeds as a special dividend.

Assuming its CET-1 capital ratio post disposal is lowered from 16% to the industry’s 15.1%, CGS CIMB estimates a special dividend of 22 sen per share (additional dividend yield of 11.2%). Any special dividends by banks are subject to Bank Negara Malaysia’s (BNM) approval   

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