Table of Content

Pestal Analysis Issues in the

Company
industry Rrecommendation
background
2 3 4
1

Industry Analysis Issues that may

History
Arise Recommendation
Financial performance
Key highlight Swot Analysis Strategic.
Share capital Directions
Key ratio
Tows Analysis Issues that exists
Corporate information
Structure
Mission and vision
Objectives
Synopsis of activities
 Background of Affin

 AFFIN Holdings Berhad, an investment holding company, primarily

engages in commercial and investment banking, hire purchase, Islamic
banking, and fund and unit trusts management businesses in Malaysia.

 The company was formerly known as AFFIN Holdings Sdn Bhd and
changed its name to AFFIN Holdings Berhad in May 1991. AFFIN
Holdings was incorporated in 1975 and is based in Kuala Lumpur,
Malaysia.
 Background of Affin
 The company’s investment banking products and services include
advisory services and structuring of private debt securities; corporate
finance and advisory services for corporate listings, mergers, and
acquisitions; capital raising through issues of equity and debt
instruments; corporate and debts restructuring exercises; and
structured lending solutions for corporate finance and capital market
activities. The company was formerly known as AFFIN Holdings Sdn
Bhd and changed its name to AFFIN Holdings Berhad in May 1991.
AFFIN Holdings was incorporated in 1975 and is based in Kuala
Lumpur, Malaysia.
 History of Affin Holdings
1 2
incorporated in Malaysia on 31 May
1975 as a private limited company
under the name of I.M.A Sdn Bhd.
On 15 September 1978, it changed
its name to AFFIN Motor and Credit
Finance (Malaysia) Sdn Bhd.
Subsequently it changed its name
again to AFFIN Credit (Malaysia) Sdn
Bhd on 16 January 1979.
AFFIN Holdings Sdn Bhd on 2 March
1991.
It was converted into a public company
under its present name on 6 May 1991. In
the last decade, AHB has changed
substantially in terms of group
organization structure through a series of
mergers and acquisitions which had been
undertaken to facilitate AHB's status as
the flagship financial services.
 Merger and Acquisitions
1
2

Acquisitions Acquisitions
2001 Acquired BSN Commercial
1997: Acquired Antara Discount Berhad
Bank Berhad.
(now known as AFFIN Discount Berhad) and
2004 Acquired United Overseas
Telenas (Malaysia) Sdn Bhd (now known as Bank (UOB)'s 45% stake in
AFFIN Money brokers Sdn Bhd).. AFFIN Securities Sdn Bhd.
1999 Acquired the remaining 36.84%
Acquired ACF Holdings Bhd and Asia interest in AFFIN Merchant Bank

Commercial Finance (M) bhd from the Lion
Group.
Berhad and AFFIN-ACF finance
Berad in 2005.
2006:AFFIN Islamic Bank Berhad
commenced its business operation .
Affin Holding Vision and Mission

Vision

 The preferred one stop financial services provider committed to

meeting and exceeding customers' expectations.

Mission

 Delivering premier investment and commercial banking solutions to

satisfy the needs of our valued clients in all sectors;

 Adoption of best business and management practices, investment in

technology and human resources and strategic alliances with
reputable world class players;

 Achieving continuous growth and prosperity for the shareholders

 Financial performance 2012

The Group’s performance as a whole reflected the individual performances of

our subsidiaries and associate company to present a highly commendable report
card for the year. AHB achieved a 17.6% increase in pre-tax profit from
RM709.1 million in 2011 to RM833.7 million in 2012. This was mainly due to
an increase in net interest income, Islamic banking income and other operating
income totaling RM140.5 million, a higher share of profit of RM28.5 million
from our associate company, AXA AFFIN General Insurance Berhad, and a
higher write-back of allowance for loan impairment of RM10.5 million. Our
earnings per share (EPS) increased to 42.08 sen as compared to 33.99 sen in
2011.
 OPERATING RESULTS KEY BALANCE SHEET DATA
FINANCIAL RATIOS

2012 2011 2010 2009 2008

(RM’Mill
ion
Revenue 2,972 2,656 2,273 2,009 2,115

PBT 834 709 638 497 404

Net profit 629 508 489 372 293
attributable
to equity
holders
of the
Company
 Key Highlights First half of 2013

 PBT increased by 3.2% to RM422.4 million as compared to RM409.4

million in 1H2012.

 The net interest income and Islamic Banking income increased by

RM16.0m or 2.9% compared to 1H2012.

 1H2013 Group Financial Performance 1H2013 EPS was 20.75 sen vs..
20.53 sen in 1H2012. Loan to deposit ratio increased from 80.86% as at
December 2012 to 83.26% in 1H2013 and is in line with the industry
average.

 Gross loans expanded by an annualized rate of 7.1% in 1H2013.

 Group Financial performance 1H2013
 Asset quality continued to register an improvement with the Gross impaired
loans ratio stood at 2.09% as at June 2013 as compared to 2.28% as at
December 2012.
 The absolute amount of impaired loan reduced from RM790 million as at
December 2012 to RM751 million as at June 2013.
 The Net Impaired Loan also showed an improvement from 1.13% as at
December 2012 to 1.02% as at June 2013.
 Impaired loans coverage increased to 73.74% in 1H2013 from 71.03% in
FY2012.
 Net Assets Per Share was RM4.23 as at end June 2013 as compared to
RM4.04 as at December 2012.
Group share capital as at 31/12/2012

Share Capital Number of ordinary share of

Group and Company RM 1:00 as at 31.12.12
‘000
Authorized 5,000,000
Ordinary shares of RM 1:00

Issued and fully paid up:- 1,494,576

Ordinary shares of RM1.00
each
 key ratios of Affin Holdings

FY (RMm) FY 2012 (RM FY2011(RM in YoY

Profitability in MILLION) MILLION) (change%)
Ratios:

Net asset yield 3.95 4.16 (0.21)

(%)
Cost of funds 2.62 2.57 0.05
(%)
NIMs (%) 2.17 2.25 (0.08)
ROE (%) 10.81 9.41 1.40
ROA (%) 1.15 1.01 0.14
Net
Loan/deposit 79.55 77.32 2.23
from customer’s
ratio (%)
 Risk-Weighted Assets

26,926.5 25,550.2 28,552.0 35,697.6 36,919.4

ALL in 2008(R 2009(R 2010(R 2011(R 2012(R

Million M) M) M) M) M)

Affin's Core 11.3 11.1 12.6 10.9 11.7

capital ratio
(%)
Affin's 13.9 13.8 13.9 12.8 14.4
RWCR (%)
Industry 10.6 13.1 12.8 12.9 13.4
core capital
ratio (%)
Industry 12.7 14.7 14.6 14.9 15.2
RWCR (%)
 LOAN LOSS/IMPAIREDLOAN LOSS
COVER- AFFIN VS INDUSTRY

All in 2008 2009 2010 2011 2012

Millions

AFFIN 71.6 81.5 59.7 72.8 71.0

INDU 89.0 95.5 99.3 99.8 104.0

STRY
 LOAN LOSS/IMPAIREDLOAN LOSS
COVER- AFFIN VS INDUSTRY

All in 2008 2009 2010 2011 2012

Millions

AFFIN
6.8 8.1 9.8 9.4 10.8

INDU 15.1 12.2 15.8 15.8 13.6

STRY

AFFIN’s FY2012 ROE was 10.8%, while AFFIN Bank’s and AFFIN
Investment Bank’s ROEs were at 14.08% and 10.5% respectively.
Source: AFFIN Analysts briefing 2012
GROUP STRUCTURE AND SHAREHOLDING (as
at 10 November 2010)
 Company’s Objectives

 The company’s main objective is to achieve sustainability. The

term of sustainability means economic development that meets the
needs of the present without compromising the ability of future
generations to meet their own needs.
 Sustainability is becoming increasingly important for companies in the
modern economy. Put simply, sustainability can be described as a holistic
continuous improvement process that includes the sound
management of people and the environment. Sustainability makes good
business sense because the benefits feed directly back into the bottom
line.
 Synopsis of Activities

 AFFIN Holdings Berhad, an investment holding company, primarily

engages in commercial and investment banking, hire purchase, Islamic
banking, and fund and unit trusts management businesses in Malaysia.
Its consumer banking products and services include savings and fixed
deposits, remittance services, current accounts, credit cards, and bank
assurance products, as well as consumer loans, such as vehicle loans,
housing loans, overdrafts, and personal loans; and enterprise banking
products.
Pestel Analysis of Malaysia
 Political Factor
 Malaysia government has limits the players in the Banking industry.

 The Malaysia government and Bank Negara Malaysia too much power.

 Bank Negara Malaysia control spectrum and license issued.

 Political Stability in Malaysia

 The government of Malaysia has been very successful in enabling

businesses, local and international, to be able to prosper and achieve
success due to the very friendly and compatible business policies
(Malaysia Country Profile, 2010)

 Economic strength coupled with an efficient, business friendly government

have supported a conducive environment for business growth (Business
and investment opportunities year book 2008, p. 79)
 Economical Factor
 Robust recovery, and the proactive policies of the authorities have helped
to limit the downturn and set the stage for a sustainable expansion (Singh
2011).

 steady growth of the per capita GDP has supported a healthy economy
performance. (Mankiw, 2007 and Puah, 2008).
 Globalization bring in more travelers and businessmen into Malaysia.
 The government of Malaysia launched 2 economy stimulus package
worth RM100Billion.
 Malaysia will reach high income nation with USD15k per annual by 2020
 Economical factors continue
 Economic Transformation Programme. Launched on September 21,
2010. The program will lift Malaysia’s Gross National Income
(GNI) to US$523 billion by 2020, and raise per capita income from
US$6,700 to at least US$15,000, meeting the World Bank’s
threshold for high income nation (International Monetary Fund
2010).

 Inflation rose in 2012 is 1.9%,

 HSBC’s prediction which suggests that Malaysia will be the top 20

economies by 2050 (fundweb.co.uk 2011).
 Social Factor
 Change in life style: life style of Malaysia is changing rapidly. They are
demanding high class products. They have become more advanced. And
this has open opportunity for banks to tap this change.

 Population: is increase in population is one of the most important factor.

Malaysian population is expected to rise a rate of 1.542% (2012 est.)
percent per year.

 Literacy rate 88.7% which makes them trust on banks.

( Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate
as of February 21, 2013)
 Technological factor
 The role of technology can’t be over emphasized, through the use of
technology new products and services are introduced. It includes
 ATM: this has encouraged the banks to change the concept of branch
banking to anywhere.
 Credit facility: technology has encouraged an era of cashless society, with
the use of smartcard, debit card etc
 IT services and mobile banking: banks using SMS and internet as major
tool of promotion.
 Offer 24 x 7 banking with faster and services.
 Environmental Factor

 Environmental issues are self explanatory and may include laws on waste
disposal, energy consumption, pollution monitoring, etc.

 Socially responsibility to save on energy and waste disposal costs.

 And as of today, both the government and many NGOs (none

governmental organizations) have invested great efforts and resources to
increase the public (mainly consumer) environmental awareness to
protect the country’s mega diversity status.
 Legal Factor
 Malaysia’s legal system is based on English common law which were
former colonies or territories of England.

 Malaysia also has a secondary legal system concurrently affecting

certain sections of the law, such as Islamic law and customary law.
Islamic law is applied to Muslims, which make up 60.4% (Malaysia

Demographics Profile 2013) of the population, in the country in matters of

family law and religion issues.
 Conclusions of the PESTEL analysis

 From a macro environment perspective, the above PESTEL analysis that

examines the key field of the macro environmental factors shows us that
though Malaysia is considered to be middle income country and its
economy is much lagged behind its neighboring two countries, Singapore
and Brunei, the fast growing pace and seemingly health political
governance provides business sector with great business opportunities
despite that the legal system and social and cultural systems could be
complex
 Industry and competition analysis

 Porter’s model of competitive forces assumes that there are five

competitive forces that identifies the competitive power in a business
situation. These five competitive forces identified by the Michael Porter
are: Threat of substitute products, Threat of new entrants, Intense
rivalry among existing players, Bargaining power of suppliers and
Bargaining power of Buyers. Porter’s Five Forces model can be used to
understand how profitable a target industry might be and to understand
the forces impacting upon the current industry’s profitability (Graham &
Allan 2008, p. 40).
 Top Banks In Malaysia 2012

Name of the Market

Bank Asset Size
Bank Capitalization
1. Maybank 47.99 317.04
2. CIMB Group 46.64 228.89
3. Public Bank 38.71 209.04
4. RHB Capital 11.46 110.49
5. AMMB Holding 14.79 92.45
6. Hong Leong 13.11 77.02
7. EON Capital 4.56 44.39
8. Affin Holdings 3.79 38.75
Alliance
9. Financial 4.19 30.28
Group
10. Bank Islam 1.29 7.1
Michael Porter’s 5 Forces

Customer
Bargaining
Power

Threat of
Industry Threat of
New Competitors Substitutes
Entrants

Supplier
Bargaining
Power
 Threat of New Entrants:

 The barrier to entry into banking industry is mainly due to the regulation and
policy by government.
 . In additional, solely right for certain projects are given by government to the
existing entrants will be also a threat for potential entrants to compete in this
high competitive industry.
 Capital requirement is usually an important issue to build up a firm which is
has high capability to compete in the industry
 Power of Suppliers

 Capital is the primary resource on any bank and there are four major
suppliers of capital in the industry.
1. Customer deposits. 2. mortgages and loans. 3. mortgage-baked
securities. 4. loans from other financial institutions.
By utilizing these four major suppliers, the bank can be sure that they
have the necessary resources required to service their customers'
borrowing needs while maintaining enough capital to meet withdrawal
expectations.
 Power of Buyers

 The individual doesn't pose much of a threat to the banking

industry, but one major factor affecting the power of buyers is
relatively high switching costs. If a person has one bank that
services their banking needs, mortgage, savings, checking, etc, it
can be a huge hassle for that person to switch to another bank.

 As a buyer, the customer’s bargaining power is less since all

banks offer essentially the same products. Due to the status quo
maintained by the industry, a buyer lost by one bank will end up
with another bank resulting in a round robin situation
 Availability of Substitutes

 Some of the banking industry's largest threats of substitution are not from
rival banks but from non-financial competitors.
The industry does not suffer any real threat of substitutes as far as
deposits or withdrawals, however insurances, mutual funds, and fixed
income securities are some of the many banking services that are also
offered by non-banking companies.

 The returns in these substitutes vary and are volatile; in addition,

these services are less regulated. This makes it difficult for the
already skeptical customer to trust and opt for substitutes
 Industry Competitor
 The financial services industry has been around for hundreds of years,
and just about everyone who needs banking services already has them.
Because of this, banks must attempt to lure clients away from competitor
banks. They do this by offering lower financing, higher rates, investment
services, and greater conveniences than their rivals. The banking
competition is often a race to determine which bank can offer both the
best and fastest services. Given the nature of the industry it is more likely
to see further consolidation in the banking industry. Major banks
tend to prefer to acquire or merge with other banks than to spend
money marketing and advertising.
 SWOT ANALYSIS
Weakness Opportunity Threats
Strength

1 2 3 4

On line banking .

Brand Multinationals
Wide product line Globalization Globalization
Wide range branches Advertisement Diversification Change in taste
Interactive culture Supply chain Population
Substitute products
Strong performance Financial leverage
Intense competition.
 TOWS MATRIX OF AFFIN HOLDINGS

External Opportunities External Threats

EFAS (O) (T)
1. Substitute products
1. Globalization
2. Intense competition
2. Diversification
3. Multinationals
3. Population
4. Globalization
4. Financial leverage
IFAS 5. Change in taste

Internal Strengths SO ST
(S) S1-S4 and O1-O4 S1 and T4
1. On line banking.
2. Wide product line.
3. Wide range branches.
4. Strong performance
5. Brand
6. Interactive culture

Internal Weaknesses (W) WO WT

1. Advertisement S5 and W1 W1 and T3
2. Supply chain
 Issues That May Arise

 General economic factor: issues on this category include inflation or

deflation. It also includes economic meltdown which can affect the
performance of the industry.

 Changing regulatory condition: changes as policy as a result of

change in economic condition, political condition which have direct
impact on the organization.

 Changing consumer needs: the performance of the industry will be

affected when there is change in the needs of the consumers, therefore
there is need for constant checking of consumer needs and wants in
other to be able to satisfy them.
 Shifting the Focus of Strategy Analysis:
From the External to the Internal Environment

THE FIRM THE

Goals and INDUSTRY
Values ENVIRONMENT
Resources and
Capabilities STRATEGY •Competitors
Structure and STRATEGY •Customers
Systems •Suppliers

The The
Firm-Strategy Environment-Strategy
Interface Interface
Rationale for the Resource-based
Approach to Strategy

 When the external environment is subject to

rapid change, internal resources and capabilities
offer a more secure basis for strategy than
market focus.

 Resources and capabilities are the primary

sources of profitability.
The Links between Resources, Capabilities
and Competitive Advantage

INDUSTRY KEY
COMPETITIVE SUCCESS FACTORS
STRATEGY
ADVANTAGE
ORGANIZATIONAL
CAPABILITIES

RESOURCES
TANGIBLE INTANGIBLE HUMAN

•Financial •Skills/know-how
•Technology •Capacity for
•Physical •Reputation communication
•Culture & collaboration
•Motivation