AFFIN Bank Bhd (KL:AFFIN), which recently re-entered the asset management space through the acquisition of Pheim Asset Management Sdn Bhd, is now eyeing a move into private equity (PE) as it seeks to broaden its range of services and diversify its income streams.
“We are looking at going into PE. Bank Negara Malaysia has given us its approval and we are in the midst of applying to the Securities Commission Malaysia for a PE licence,” president and group CEO Datuk Wan Razly Abdullah Wan Ali tells The Edge on the sidelines of the Affin Market Outlook Conference last Tuesday (May 12).
In Malaysia, only a few banking groups have a dedicated PE business, as it requires specialised talent and a higher risk appetite.
Affin Bank, one of the country’s smallest banking groups, has already hired a team for the business, says Wan Razly.
The PE business will fall under its investment banking arm Affin Hwang Investment Bank Bhd (Affin Hwang IB).
“We see PE as highly complementary to investment banking. Over the years, we have come across many attractive investment opportunities but could only participate from an investment banking standpoint because we did not have a PE licence.
“As we evolve into more of a wholesale banking model, PE becomes another pillar alongside our corporate banking, investment banking and treasury capabilities, helping us create value across the franchise,” Wan Razly says.
He notes that there is a need to elevate the bank’s offerings, particularly for the wealthier segment.
“We had overwhelming demand from the high-net-worth segment. These customers are asking for more sophisticated investment opportunities. They want higher returns and are willing to take on more risk, so we are working to find the right product mix to meet that demand.”
Wan Razly says the bank is also assessing the possibility of venturing into private credit, Bitcoin lending and microfinancing in the future.
Affin Bank completed its RM50 million cash acquisition of Pheim Asset Management on April 22 and the firm will be rebranded as Affin Pheim Asset Management.
Unlike its previous asset management venture, the business will operate as a wholly-owned subsidiary directly under the bank, enabling the lender to strengthen its wealth management proposition.
Previously, Affin Hwang Asset Management (AHAM) was held under Affin Hwang IB. Affin Bank sold its entire 63% stake in AHAM for RM1.2 billion in July 2022.
According to Wan Razly, Affin Pheim should be able to grow its assets under management to RM6 billion within three years, from about RM833 million currently, by leveraging the bank’s distribution network and customer base.
Analysts note that these new ventures will help Affin Bank build up its fee income while reducing its reliance on lending income amid continued pressure on net interest margins (NIM).
After two straight years of NIM declines, Affin Bank managed to grow its NIM by 11 basis points (bps) to 1.45% last year, despite a 25bps cut in the overnight policy rate in July, as the lender pursued CASA (current account and savings account) deposits — a cheaper source of funds — more aggressively. This year, it is targeting a higher NIM of 1.55% and an improved CASA ratio of 30%, up from 24.96%.
“It’s a crawl up,” Wan Razly says of the bank’s NIM, stressing that funding cost pressures remain a challenge.
The bank’s targets, which include profit-before-tax guidance of RM850 million compared with actual PBT of RM755.7 million in 2025, may be difficult to achieve given challenges arising from the unexpected conflict in the Middle East.
Be that as it may, Wan Razly says the bank is not revising any of its targets for the year unless the war drags on beyond June.
“Our house view is that the war should end by June. I think Malaysia still has the resilience and agility to recover in the second half of the year. The elevated energy prices and knock-on effects will likely reverse quite quickly,” he opines.
Among borrower segments, small and medium enterprises (SMEs) are the most vulnerable to the impact of the war, he notes. For Affin Bank, its SME business accounted for about 10% of loans in its RM8.3 billion enterprise banking division last year.
Analysts will be keeping a close watch on whether lenders raise their loan-loss provisions as early as the upcoming first-quarter financial results, which will be released later this month. Affin Bank’s gross impaired loans ratio improved by a solid 30bps to 1.64% last year, from 1.94% in 2024, but it expects the ratio to inch up to 1.8% this year.
The missing piece and Sarawak
Affin Bank remains on the lookout for bank acquisition opportunities as it seeks to scale up more quickly.
“The missing piece for us is scale. We want to become a bigger banking group. So, if we find something complementary that allows us to scale faster, we will act on it,” Wan Razly states.
“A bank would be ideal. It would be highly synergistic for us because we could combine our technology platform and scale that bank rapidly.
“There are no active discussions [for mergers and acquisitions] at the moment. There is courtship. I think the market knows that we are on the lookout.”
Last year, Affin Bank grew loans by 10.4% — the fastest pace among local banks — while deposits grew by almost 8%.
“That’s good momentum. Every year, we are a different bank from what we were the year before. This year, you will see our tech capabilities coming onstream after investments made over the last three years. For example, we are rolling out our new stockbroking platform at the end of this month. This will put us on better footing in terms of customer experience,” he says.
According to Wan Razly, Sarawak is the fastest-growing state for the bank’s business.
This is no coincidence, as the state became the bank’s largest shareholder in late 2024, and now has a stake of around 30%. The bank has 13 branches in Sarawak and aims to increase that number to 20 “as soon as possible”.
“We are seeing very strong loan and deposit growth in Sarawak. It is our fastest-growing market, followed by Sabah,” he says.
Affin Bank will open a new regional office in the Plaza Shell building in Kota Kinabalu, Sabah, pending Bank Negara approval, he adds.
Affin Bank’s stock has risen 4.3% year to date to close at RM2.45 last Wednesday, giving the bank a market capitalisation of RM6.21 billion.
Bloomberg data shows four analysts with “buy” calls and six with “hold” calls — with no “sell” ratings — and a 12-month average target price of RM2.82, suggesting further upside potential.
“We have turned more constructive on the group’s mid- to long-term growth potential, as we believe it can now offer a differentiated growth proposition, underpinned by three levers: new wealth management capabilities via the 100% acquisition of Pheim; funding cost optimisation supported by CASA growth and product expansion via its digital-at-core banking system platform, which is highly scalable and ahead of peers’; and the group’s plan to address capital inefficiencies at the overcapitalised investment bank and transition from the standardised approach to the internal ratings-based approach,” CIMB Securities said in a Feb 27 report following the bank’s 2025 financial results.
It has a “buy” call on the bank with a target price of RM3.10.
Save by subscribing to us for
your print and/or
digital copy.
P/S: The Edge is also available on
Apple’s App Store and
Android’s Google Play.