Analysis: Affin Bank has a lot to gain from Sarawak

We gathered that Sarawak has an addressable population of up to three million, concentrated between its key cities of Kuching, Sibu, Bintulu and Miri.

Analysts with Kenanga Investment Bank Bhd (Kenanga Research) believes that Affin Bank Bhd (Affin Bank) has a lot to gain from its growing interests in Sarawak following the Sarawak state government’s 4.8 per cent shareholding through the Sarawak State Financial Secretary.

“We gathered that Sarawak has an addressable population of up to three million, concentrated between its key cities of Kuching, Sibu, Bintulu and Miri.

“While Affin Bank has six branches collectively there, there is a need to elevate accessibility for financial services, particularly in the rural areas,” commented Kenanga Research in its note yesterday.

To support this cause, the group is looking into expanding its branch network into the teens but with no indication on its timeline for now.

Kenanga Research

“This could also include a wider footprint of offsite ATM and CRM machines across the state with mobile financial centres set up in more rural areas.”

Kenanga Research expected there to be potential upside for Affin Bank with Sarawak’s prosperity.

“As of its reporting data up to the third quarter of financial year 2023 (3QFY23), Sarawakbased accounts comprised of RM2.8 billion or four per cent of its total loans.

“We opine that a larger presence could drive its books share here, albeit not likely to surpass its Kuala Lumpur (22 per cent) or Selangor (31 per cent) portfolios.

“On the flipside, we note that the group has been aggressive with its issuance in debt capital market products which may benefit from the state’s participation.”

The research house observed that Affin Bank’s share price saw strong appreciation with the inclusion of Sarawak state government amongst its shareholders, spurring hopes of substantial spillovers from there.

“We believe it could be overbought with our abovementioned discussions indicating that immediate benefits need to be more meaningful.”

While Affin Bank has six branches collectively in Sarawak, Kenanga Research says there is a need to elevate accessibility for financial services, particularly the rural areas.