Affin Bank sinks to 8-month low after Q2 profit disappoints

 Its net profit slumped 11% as provisions for bad debts more than doubled in the second quarter.

Affin Bank Bhd’s shares fell as much as 3 sen or 1.3% to RM2.20, the lowest level since December 2025.

PETALING JAYA:

Affin Bank Bhd slumped to its lowest in eight months after an 11% drop in second quarter net profit as provisions for bad debts rose sharply at one of Malaysia’s smallest banking groups.

Net profit for the quarter ended June 30 (Q2 FY2026) was RM127.52 million compared to RM143.49 million a year ago.

For the first six months of FY2026, net profit totalled RM263.02 million, a drop of nearly 2% from the first half of 2025, according to the bank’s exchange filing yesterday.

Affin’s shares fell as much as 3 sen or 1.3% to RM2.20, the lowest level since December 2025. The stock closed 0.9% or 2 sen lower at RM2.21, valuing the Sarawak government-backed banking group at RM5.82 billion.

“The US-Iran conflict has extended beyond the earlier ceasefire expectations, intensifying cost-of-living pressures in Malaysia and placing greater strain on consumer sentiment and spending,” said Affin president Wan Razly Abdullah in a statement.

In response, the group has further tightened its underwriting standards, he added.

Affin, ranked No 7 by asset size among Malaysia’s eight banking groups, has lost nearly 21% of its value from this year’s high of RM2.78 recorded in February, amid concerns over the rising allowance for bad debts.

Allowances for credit impairment losses more than doubled year-on-year to RM78.8 million in the second quarter.

CIMB Securities noted that the bank’s provisions have now remained elevated for two consecutive quarters, and investors want to see clearer evidence that credit costs have peaked and asset quality is stabilising.

The research house, which downgraded the stock to “hold” from “buy”, also flagged weaker near-term return on equity (ROE) and delayed earnings recovery.

Meanwhile, Hong Leong Investment Bank (HLIB) said Affin’s first half FY2026 total income rose 12.2% on solid balance-sheet expansion but “surging credit costs wiped out topline gains”.

It added near-term pressure from intense deposit competition remains a key risk to net interest margins, a measure of profitability from interests charged on loans after deducting returns paid to depositors.

“Without stronger near-term rerating catalysts, we opine that potential provisioning upticks are likely to cloud the earnings outlook over the next two to three quarters,” cautioned HLIB, which kept its “hold” call on the stock but with a lower target price of RM2.30.

The Sarawak government became Affin’s largest shareholder with a 31.25% stake after acquiring a 27% interest from the Armed Forces Fund Board (LTAT) and its unit Boustead Holdings Bhd in November 2024. Prior to that, the state had a 4.8% stake in the bank. - FMT