Affin Bank Berhad has announced a significant change in its shareholder structure following the acquisition of a 31% stake by the Sarawak Government through its wholly owned subsidiary, SG Assetfin Holdings Sdn Bhd (SAH). This new development positions SAH as the largest shareholder of Affin, which previously had the Lembaga Tabung Angkatan Tentera and Boustead Holdings as key shareholders. Although the entry of SAH is expected to offer potential long-term benefits for Affin, fundamental concerns regarding the bank's financial health remain, leading analysts to maintain a cautious outlook.

MIDF Stock Broking House (MIDF) have made its calls regarding Affin Bank's stock, with a SELL rating. Affin Bank is currently rated as SELL by Affin Investment Bank with a revised target price of RM2.35, up from RM1.82. The anticipated share price return is expected to be negative at -20.3%, with an expected total return of -18.1%. This cautious stance reflects ongoing concerns about the bank's operating expenses, net interest margin (NIM) compression, and asset quality.

Despite the positive sentiment surrounding the new largest shareholder, short-term challenges persist for Affin Bank. The bank has been grappling with high operating expenses and a lack of control over its cost-to-income ratio (CIR). The NIM compression is likely to continue, affecting the bank's profitability. Although the outlook for net credit costs has improved, the bank still faces scrutiny over its asset quality, which remains a critical concern for investors.

The introduction of SAH as a major shareholder is expected to bolster Affin Bank's investment banking opportunities, which could enhance its non-interest income potential. Furthermore, the Sarawak Government's involvement may facilitate the bank's efforts to focus on small and medium-sized enterprises (SMEs) and corporate segments, aiming to improve yields in these areas. While this strategic shift aligns with the bank's rebalancing intentions, it will take time for the positive effects of the new shareholder to materialise.

MIDF remain sceptical, noting that Affin Bank's current valuations appear inflated, with the bank trading at around 0.6 times its price-to-book value (P/BV). This valuation exceeds the five-year historical average of 0.34 times and reflects expectations that may not be aligned with the bank's underlying fundamentals. Despite the potential for future growth stemming from the new ownership, immediate financial performance indicators suggest that the bank is still facing a range of headwinds that could impede its recovery.