CIMB Investment Bank Bhd (CIMB Securities) and Hong Leong Investment Bank Bhd (HLIB) both maintained BUY calls on Affin Bank, with CIMB lowering its target price to RM2.90 from RM3.10 and HLIB reducing its target price to RM3.00 from RM3.20.
Analysts said the stock’s valuation remains supportive despite near-term earnings pressure, underpinned by improving operational delivery, stronger loan growth and potential structural upside from its transformation initiatives.
Affin Bank’s 1QFY26 core net profit rose about 6% quarter-on-quarter and 9% year-on-year to RM135.5 million, broadly in line with expectations as it accounted for around 23% of full-year forecasts.
Performance was supported by stronger operating income, with net interest income and non-interest income both expanding on robust loan growth of about 12.6% and higher fee-based contributions. Net interest margin also improved to around 1.54% year-on-year, reflecting better asset pricing and loan mix.
However, profitability was partly weighed by higher non-recurring provisions, which pushed annualised credit costs above guidance levels for the quarter, though analysts expect these to normalise in subsequent quarters.
Asset quality showed some deterioration with a slight uptick in gross impaired loans and lower coverage ratios, but analysts noted that loan loss reserves remained adequate. Cost discipline helped cushion earnings, with a lower cost-to-income ratio driven by effective expense management.
Sequentially, earnings growth was supported by a lower effective tax rate even as pre-tax profit softened on weaker non-interest income and higher provisioning.
Looking ahead, analysts expect earnings momentum to improve on steady loan growth, stabilising margins and easing credit costs, while caution remains on asset quality and geopolitical risks.
Structural drivers such as digital banking initiatives, wealth management expansion and capital optimisation efforts are seen as longer-term catalysts supporting return on equity uplift and valuation recovery.
As of 10.45 am, the stock price decreased by 0.41% to RM2.40.
