RAM Ratings affirms AA3 financial institution ratings of AFFIN Group

Published on 17 Nov 2023.

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RAM Ratings has affirmed the AA3/Stable/P1 financial institution ratings (FIRs) of AFFIN Bank Berhad (AFFIN Bank or the Group) and its banking subsidiaries, AFFIN Islamic Bank Berhad and AFFIN Hwang Investment Bank Berhad. Concurrently, the ratings of the entities sukuk/debt facilities have also been affirmed (see Table 1).

The rating action reflects our view that AFFIN Bank’s credit metrics will remain commensurate with its current ratings despite prevailing macroeconomic headwinds. Its strengthened loss absorption buffers in the form of loan loss coverage and capitalisation provide enough headroom to withstand the effects of higher interest rates and weaker economic prospects on its asset quality. 

The Group’s gross impaired loan ratio (GIL) eased to 1.8% as at end-June 2023 (end-December 2021: 2.5%), aided by the reclassification of two large impaired corporate accounts as performing and some recoveries. This had offset fresh defaults in its corporate portfolio and an uptick in retail delinquencies. The Group’s Stage 2 related-party loan and bond exposures of RM1.3 bil continues to be a credit concern. While overall asset quality may see some slippages in the coming quarters, we do not expect widespread vulnerabilities.

Reflective of the management’s ambition to scale up its franchise, AFFIN Bank’s loan growth averaged 12.4% in the last 3 financial periods (FY Dec 2021 - 1H FY Dec 2023) - outpacing the banking sector’s 4.4%. Seasoning risk from a rapidly growing loan book may add to delinquencies. The fast expansion has also helped suppress the Group’s GIL ratio to some extent, although we take comfort that underwriting standards have generally not been compromised at the expense of growth. AFFIN Bank’s GIL coverage ratio of a robust 156.4% as at end-June 2023 (including regulatory reserves; end-December 2021: 125.9%) limits provisioning risk.

On the back of credit expansion and increased market risk capital charges, the Group’s common equity tier-1 capital ratio (without transitional arrangements) moderated to 13.9% as at end-June 2023 (end-December 2022: 14.4%). We expect the ratio to hover around 13% in the near term, which is still supportive of its ratings. 

AFFIN Bank lags peers on some of its core profitability and funding metrics. A spike in funding cost in 1H FY Dec 2023 has pressured the Group’s net interest margin to 1.5% (FY Dec 2022: 2.1%). Its elevated cost-to-income ratio will weigh on earnings outlook in the near term. The Group’s share of current and savings account (CASA) deposits of 23.2% as at end-June 2023 (end-December 2021: 23.0%) stayed below the industry’s 35.4%. Still, AFFIN Bank managed to hold up its proportion of CASA deposits in the last two years - bucking the industry trend which has seen a normalisation of CASA balances.

Lembaga Tabung Angkatan Tentera (LTAT; the pension fund for members of the Malaysian Armed Forces) currently owns a 48.7% stake in AFFIN Bank (directly and indirectly through its ownership of Boustead Holdings Berhad, BHB), down from 54.3% previously. AFFIN Bank’s FIRs factor in RAM’s support assessment of its majority shareholder. In April 2023, LTAT sold 4.95% of its shares to the Sarawak State Financial Secretary, prompted by its move to privatise BHB. We will continue to monitor such events, if any. Material changes to LTAT’s shareholding may warrant a reassessment of AFFIN Bank’s ratings, including any new developments that may influence the Group’s standalone credit strength.


Table 1: Ratings of AFFIN Bank and banking subsidiaries


Analytical contacts
Amy Lo 
(603) 3385 2509 

Johan Faizul 
(603) 3385 2518

Media contact
Sakinah Arifin
(603) 3385 2500


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad

Rating Rationale: AFFIN Bank Berhad

Rating Rationale: AFFIN Islamic Bank Berhad

Rating Rationale: Affin Hwang Investment Bank Berhad

Ratings on AFFIN Bank Berhad