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RAM Ratings affirms AFFIN Group’s AA3 financial institution ratings
Published on 21 Jul 2026.
RAM Ratings has affirmed the AA3/Stable/P1 financial institution ratings of AFFIN Bank Berhad (the Group) and its banking subsidiaries, AFFIN Islamic Bank Berhad and Affin Hwang Investment Bank Berhad. The reaffirmations also extend to the Group’s outstanding issue ratings, reflecting our view that AFFIN Group’s credit profile remains resilient despite earnings pressure and a more challenging operating environment.
AFFIN Bank’s ratings benefit from an uplift from its standalone credit profile, reflecting our assessment of a ‘moderate’ likelihood of extraordinary support from the Sarawak government, the Group’s largest shareholder with a 31.3% stake.
The Group’s standalone credit profile is expected to stay commensurate with its current ratings, despite macroeconomic headwinds. Gross impaired loan ratio improved to 1.7% as at end-March 2026 from 1.9% as at end-December 2024, largely owing to stronger recoveries, write-offs and rapid loan growth. While tighter credit underwriting and monitoring should keep asset quality in check, downside risks remain from portfolio seasoning and external uncertainties, particularly in the SME segment where borrowers are more sensitive to cost inflation and slower demand. Capitalisation stayed healthy, with an adjusted common equity tier-1 capital ratio of 12.7% (including unaudited 1Q FY Dec 2026 net profit), compared with 13.2% as at end-December 2024 despite strong corporate lending growth during the quarter.
Funding and profitability remain key rating moderators. Customer funding accounted for 71% of total funding at end-March 2026, down from 76% as at end-December 2024, as the Group increased its use of wholesale and alternative funding sources, including bonds, Cagamas facilities, reverse repurchase agreements and investment accounts. The shift improved funding flexibility but also heightens sensitivity to market access and pricing conditions relative to a more deposit-led funding profile.
The net interest margin improved slightly to 1.37% in FY Dec 2025 and an annualised 1.43% in 1Q FY Dec 2026, driven by lower funding costs as most deposits repriced lower following the 25-bps OPR cut in July 2025 as well as an uptick in the net loan to customer funding ratio. However, profitability remains pressured by elevated operating expenses arising from ongoing IT investments and branch expansion. We expect earnings to stay constrained in the near term amid economic headwinds.
Analytical contacts
Sean Lim, CFA
(603) 2708 8253
sean@ram.com.my
Kee Hwai Zher
(603) 2708 8259
hwaizher@ram.com.my
Amy Lo
(603) 2708 8289
amy@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my
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 2026 by RAM Rating Services Berhad
Rating Rationale: AFFIN Bank Berhad
Rating Rationale: AFFIN Islamic Bank Berhad
