Published on 27 Nov 2020.
RAM Ratings has reaffirmed Affin Hwang Investment Bank Berhad’s (the Bank) AA3/Negative/P1 financial institution ratings (FIR). The ratings mirror that of AFFIN Bank Berhad (AFFIN Bank or the Group), given the Bank’s strategic role as the Group’s investment banking and stockbroking arm. The outlook on Affin Hwang’s long-term financial institution rating was revised to negative from stable in August this year pursuant to the revision in outlook on AFFIN Bank’s FIR to negative.
Affin Hwang houses AFFIN Bank’s stockbroking, asset management and investment banking operations. It remains the largest player in the stockbroking arena, holding market shares of 15% by trading value and 21% by trading volume in 9M 2020, supported by proprietary trading activities. The Bank also ranks among the top asset management players in the country, with assets under management of about RM61 bil as at end-June 2020. That said, Affin Hwang’s investment banking franchise is still relatively modest compared to peers in larger banking groups. Its market shares in the Malaysian debt and equity capital markets were only 2% and 5%, respectively, by transaction value, in 1H FY Dec 2020.
As with other investment banks, Affin Hwang’s earnings are inherently volatile in view of the susceptibility of its business activities to market conditions and investor sentiment. Nevertheless, the Bank’s robust common equity tier-1 capital ratio of 37.4% as at end-June 2020 is anticipated to provide a solid absorption buffer against earnings volatility. The Bank’s asset management business also mitigates such volatility to some extent as it provides a more stable income stream. In 1H FY Dec 2020, the Bank’s pre-tax profit surged to RM211 mil (1H FY Dec 2019: RM98 mil) on the back of significantly stronger stockbroking activities – particularly from retail participation – underpinned by low interest rates as well as the nationwide six-month automatic moratorium on retail loans. The Bank had also recorded more robust investment and trading income as it realised some gains amidst the bond and equities rally.
Jeremy Noel Paul
(603) 3385 2556
(603) 3385 2577
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Ratings on Affin Hwang Investment Bank Berhad