President and group chief executive officer Wan Razly Abdullah Wan Ali said today its shareholders had approved the divestment of its entire equity stake of 63% in the asset manager to CVC Capital partners.
He said the bank had received an attractive offer from CVC Capital and it is able to sell at the top of the valuation range.
Wan Razly said the offer translates into a price to earnings (PE) ratio of 19.7x FY2020 and 18.6x PE ratio FY2021 which it will reinvest in its core banking business.
“Gains from the divestment will be invested into the bank and assuming a 10x multiplier, will generate additional income of RM190 million of net interest income over two years,” he told the media following Affin Bank’s annual and extraordinary general meeting today.
Wan Razly expects the divestment to translate into a loan growth of RM10 billion over the next two years, in line with its current growth trajectory.
In FY2021, the group’s loan grew 11.1% to RM51.42 billion from RM46.27 billion reported for FY2020.
With the rising overnight policy rate (OPR) environment he believes loan growth in the market will start to taper off and consumers will monitor the cost of borrowings and their income levels.
On May 11, Bank Negara Malaysia’s (BNM) Monetary Policy Committee raised the key rate by 25 basis points (bps), earlier than market expectations.
This is in line with the rising rates environment as the US Federal Reserve raised its rate by 25 bps in March and by another 50 bps in May.
“But you know, we do see a positive gross domestic product and there is still a need for loan growth and we hope to be able to ride the wave of pandemic recovery as well,” Wan Razly said.
He assured shareholders that with the divestment they would be rewarded with a special dividend when the deal is completed at the end of September this year.
Once the deal is concluded, Affin Bank will submit an application to BNM to issue the dividend and it expects to reward its shareholders by the end of the year.
On the subject, chairman Agil Natt stressed that it will first have to assess its capital before any dividend is paid.
“The board will have to ensure that sufficient capital is retained by the group for its long-term growth. Any payment of dividends will have to take that into account,” he said.
When asked about the prospects of any future mergers and acquisitions for Affin Bank, Wan Razly said it was still far away from such activities as it focused on strengthening the core banking business.
“There are some key numbers we want to achieve such as current-account-savings-account (CASA) ratio, cost-to-income ratio and loans coverage before we can even consider any mergers and acquisitions,” he added.