Revenue for the year fell 39.79% to RM1.98 billion from RM3.29 billion the previous year.

The bank, the financial services arm of the Armed Forces Fund Board (LTAT), also missed some of its own 2023 targets with profit-before-tax, net interest margin and cost-to-income ratio coming in lower than expected.

Its net interest income for FY2023 dropped 23% to RM782.88 million due to a disproportionate increase in interest expense throughout the year owing to market competition. However, its non-interest income surged 77% to RM607.3 million thanks to gains on financial instruments and foreign exchange.

Affin’s fourth quarter (Q4 FY2023) net profit jumped 138.77% to RM39.54 million from RM16.56 million a year ago on a significant decline in provisions and lower taxes. However, research houses shrugged off this positive.

RHB Research said Affin’s FY2023 net profit of MYR402.19 million was a miss, forming 88% and 84% of its and street’s estimates.

“The variance from our forecasts came from higher-than-expected operating expenditure (opex),” it said, adding it was lowering its FY2024-25 forecasts by 12%-14% after the results miss.

The research house said the dividend per share (DPS) also “disappointed” at 5.8 sen with a lower-than-expected 34% payout compared with FY2022’s 12.3 sen DPS, representing a 50% payout.

RHB kept its “sell” call, reducing its target price (TP) to RM1.70 from RM1.90 previously. Affin’s shares edged up 2 sen or 0.8% to RM2.60 at the close, valuing the group at RM6.1 billion.

Meanwhile, Kenanga Research maintained its “underperform” rating as Affin’s FY2023 results and dividends “disappointed expectations” from income-related challenges.

It cut its FY2024 earnings forecast by 9% and lowered its TP to RM1.80 from RM1.90.

It also said its FY2025F numbers for now only reflects a return on equity (ROE) of 5.5% behind the group’s 8% target as “we await more favourable quarterly performances”.

TA Securities has also issued a sell call on Affin but with a higher TP at RM2.25.

“Affin’s FY2023 net profit came in 14% and 15% below our full-year forecast and consensus full-year estimates, respectively. The negative deviation was attributed by deeper-than-expected NIM compression alongside heavier personnel cost pressures,” it said.

However, it noted that non-interest income surged 77% thanks to better investment gains, cushioning the decline in total income to just 3%.