PETALING JAYA: Affin Bank Bhd may face some hurdles from underlying macroeconomic concerns in the first half of the year with hopes for a recovery in the second half.

       In view of a heightened interest rate environment, the group may be holding back on its mortgage growth strategies until rates are more palatable for consumers.

       Additionally, with certain small and medium enterprises seeing dampened asset quality, no thanks to unfavourable economic conditions, the group may be required to review its position, said Kenanga Research.

       That said, the research house added that broader financing prospects may come from ongoing infrastructure projects.

       The group’s financial year 2025 (FY25) targets include pre-tax profit of RM1.5bil, return on equity of 10% and a loan book of RM90bil.

       For the immediate FY23, the group has set a pre-tax profit target of RM600mil.

       The bank’s share price saw rising interest following the strategic entry of the Sarawak state government with a 4.8% shareholding through the Sarawak State Financial Secretary’s Office.

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       As of the third quarter of FY23, Sarawak-based accounts comprised RM2.8bil (4%) of the bank’s total loans.

       Kenanga Research is of the view that a larger presence could drive the numbers up, although this is not likely to surpass its Kuala Lumpur (22%) or Selangor (31%) portfolios.

       On the flipside, the research house noted the group has been aggressive with its issuance of debt capital market products, which may benefit from Sarawak’s participation.

       It said Sarawak has an addressable population of up to three million people concentrated between its key cities of Kuching, Sibu, Bintulu and Miri.

       While Affin has six branches in the state, collectively, there is a need to elevate accessibility for financial services, particularly in the rural areas.

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

       The expansion could also include a wider footprint in terms of offsite automated teller machines and deposit machines across the state and mobile financial centres to cater to more rural areas.

       The research house has downgraded its call to “underperform” with an unchanged target price of RM1.90 a share.