Affin Bank injects RM500mil capital

KUALA LUMPUR: The Affin Bank group has boosted its Tier 1 and Tier 2 capital by RM500mil in the first quarter of this year, and further capital injection, in view of Basel 3 (global regulatory standard) requirements, is in the pipeline.

“There are plans for further capital injection by shareholders to strengthen the capital base and meet requirements with respect to our projected business growth and also in view of the upcoming Basel 3. An appropriate announcement will be made when the time comes.

“Our board has been briefed and is fully committed to put in more money if necessary,” Affin Bank managing director Datuk Zulkiflee Abbas Abdul Hamid told StarBiz.

Loan growth was 17% in 2010 and 14% in 2011. For 2012, the bank aims to maintain double-digit loan growth momentum.


Bullish forecast: Affin Bank aims to maintain double-digit loan growth this year, although Zulkiflee (inset) says 2012 will be a challenging year for the banking sector.
“Everybody is saying 2012 will be challenging. Yes, it is challenging but we have our niche; we feel there is still a market out there for us to grow. However, we will grow our business without sacrificing our asset quality,'' said Zulkiflee.

Affin's loan deposit (LD) ratio has stabilised at 80%-85%, a balance that is within the industry standard. “We plan to maintain the LD ratio by bringing up the deposit base in line with the growth in loans,'' he said.

According to the Affin Bank's 2011 annual report, deposits hit RM36.5bil while loan base was at RM29.7bil.

The banking group's asset base has doubled to RM50bil in six years. Likewise, its capital base has also gone up by RM2.3bil to RM4bil, with RM3.3bil or about 83% representing the core or Tier 1 capital.

Its risk-weighted adequacy ratio (RWCR) stands at 11.9 % on a bank group basis as at December last year; that ratio is expected to improve with the additional capital received in the first quarter of this year.

“We are well-capitalised with 83% already in Tier 1 capital. We do not depend too much on Tier 2 capital,'' said Zulkiflee.

This year Affin Bank will be focusing on growing with the existing customers. This will form part of the bank's broad strategies of ensuring asset quality as well as customer retention.

“In the banking industry, annual business growth is expected,'' he said. ”Our focus is to know our customer and the viability of projects to be undertaken,'' he said, adding that being proactive with existing good customers was a priority.

“We should have the financing packages ready to meet customer's business as well as individual requirements,'' he said, adding that inculcating such a proactive customer relationship culture, though, will take time but is a priority for the bank.

However, Affin will not be competing on pricing alone. “With the thinning of net interest margin (NIM), we would have to take into account our cost of capital as well as the risk we take,'' he said.

Recognising the thinning of NIM, Affin Bank will be putting more emphasis on its fee-income business. “Currently, our fee income is mostly from commissions, foreign exchange and loan syndication fees,'' said Zulkiflee.

“We will be enhancing our fee-based income by focusing on businesses such as the sale of unit trusts and insurance.''

The contribution from fee or non-interest income to total income is currently at 20% and is expected to increase gradually to 25% in the medium term.