Published on 21 Nov 2019.
RAM Ratings has reaffirmed Affin Hwang Investment Bank Berhad’s (the Bank) AA3/Stable/P1 financial institution ratings. The ratings are anchored by Affin Hwang’s strategic role as the investment banking and stockbroking arm of AFFIN Bank Berhad (the Group, rated AA3/Stable/P1). As such, we believe the Bank will be able to rely on group support in times of need.
Affin Hwang houses AFFIN Bank’s stockbroking, asset management and investment banking operations. Among Malaysia’s top stockbrokers, Affin Hwang captured 13% of market share by trading value in 10M 2019, although a substantial portion of which was contributed by proprietary trading activity. The Bank also has an established presence in the asset management sphere, boasting the third-largest portfolio of assets under management amounting to RM52.9 bil as at end-June 2019. However, its investment banking franchise remains modest compared to peers in larger banking groups, with market shares of 6% and 5% in the Malaysian debt and equity capital markets, respectively, in fiscal 2018.
As with other investment banks, Affin Hwang’s earnings profile is inherently volatile as it is subject to market conditions and investor sentiment. Despite stronger earnings from its more stable asset management business, the Bank’s pre-tax profit was lower at RM161.5 mil in fiscal 2018 (fiscal 2017: RM183.8 mil) owing to the broad-based suboptimal performance of other divisions. Pre-tax profit, however, improved y-o-y to RM98.2 mil in 1H fiscal 2019 (1H fiscal 2018: RM83.7 mil) on the back of a better showing by the Bank’s treasury and asset management operations. Profitability for full-year fiscal 2019 may, nevertheless, remain under pressure amid subdued market conditions and weaker investor sentiment. Affin Hwang’s capitalisation stayed robust as at end-June 2019, with common equity tier-1 capital and total capital ratios standing at a respective 32.3% and 33.7%.
Tan Shu Xuan
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Ratings on Affin Hwang Investment Bank Berhad