RAM Ratings has reaffirmed Affin Hwang Investment Bank Berhad's (Affin Hwang or the Bank) AA3/Stable/P1 financial institution ratings. The ratings are anchored by Affin Hwang's strategic role as AFFIN Bank Berhad's (the Group, rated AA3/Stable/P1) investment-banking arm. Following the transfer of all of AFFIN Holdings Berhad's subsidiaries to the Group in October 2017  as part of its ongoing corporate reorganisation  Affin Hwang is now wholly owned by AFFIN Bank.

Notably, Affin Hwang has consistently ranked among the top stockbrokers in Malaysia, with a strong retail presence. The Bank came first in terms of the market's trading value in 10M 2017, having facilitated 11.9% of the industry's transactions. Affin Hwang also stands among the leading domestic asset-management companies, placing fifth with close to RM40 billion of assets under management as at end-June 2017.

As with most investment banks, Affin Hwang's earnings are inherently volatile as it is subject to investor and market sentiment. That said, the Bank enjoys a steady stream of revenue from its asset-management business, which has been accounting for about 50% of its top line in the last few years. Affin Hwang's pre-tax profit almost doubled to RM131.0 million in fiscal 2016, driven by a better performance in the Bank's asset management, IB and treasury operations, although its stockbroking unit posted weaker earnings owing to an industry-wide slump last year. The Bank's earnings momentum held steady in 9M fiscal 2017, when it chalked up RM140.4 million of pre-tax earnings driven by a healthier deal flow, a more robust stock market and a better performance from its asset-management unit during the year; this translated into an annualised return on equity of 11.8%. Affin Hwang's capital position remained strong as at end-September 2017, with a common-equity tier-1 capital ratio of 32.7%. 

 

Analytical contact
Loh Kit Yoong
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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.

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