RAM Ratings has affirmed the AA3/Stable/P1 financial institution ratings of AFFIN Bank Berhad (AFFIN Bank or the Group) and its banking subsidiaries, AFFIN Islamic Bank Berhad (AFFIN Islamic) and Affin Hwang Investment Bank Berhad (Affin Hwang). The existing issue ratings of these entities have concurrently been affirmed. 

Following the Sarawak state government's acquisition of shares in AFFIN Bank held by Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera (LTAT), it now holds a 31.25% stake, making it the Group's largest shareholder. LTAT's combined direct and indirect interest has decreased to 22.0% from 48.8% previously. Under the new ownership structure, AFFIN Bank's ratings will continue to benefit from extraordinary parental support based on our belief that the Sarawak government will provide ready support if needed.

The Group's gross impaired loan ratio improved marginally to 1.8% as at end-March 2025 (end-December 2023: 1.9%), partly aided by an expanded loan base, write-offs and recoveries. The proportion of Stage 2 loans and bonds declined to 5.1% (end-December 2023: 7.1%) on the back of rigorous collection efforts. That said, we remain cautious of further seasoning effects from AFFIN Bank's rapidly growing loan book, which has seen an average growth of 11.9% over the last three years. 

On a positive note, the Group's exposure to customers with direct exports to the US is limited, estimated at just 3.6% of its loan portfolio (or RM2.6 bil). While global tariff tensions are likely to have broader implications for the macroeconomy, potential credit deterioration in AFFIN Bank's portfolio is expected to be manageable. A healthy common equity tier-1 capital ratio of 13.5% (end-December 2023: 13.6%, without transitional arrangements) and loan loss coverage (including regulatory reserves) of 124.5% as at end-March 2025 provide sufficient headroom to absorb potential credit weakening.

AFFIN Bank's profitability and funding metrics remain mod