Australian Finance Group (ASX:AFG) reported a "solid" half-year result and hit record outcomes, but its share price has not kept up due to interest rate and inflation concerns, Euroz Hartleys said in a Thursday note.

The company expects further earnings growth in the second half of the year, with increased business volume, improved direct lending volume, a favorable net interest margin, and lower cost-to-income trends.

However, the share price has dropped back to last year's levels despite recently hitting as high as AU$2.80.

Investors are worried about the effects of rising interest rates and inflation on consumer borrowing behavior, but there is increasing discussion that interest rates may not increase further due to ongoing economic uncertainty, the financial services firm said.

Euroz Hartleys reaffirmed its buy recommendation on Australian Finance Group and lowered its price target to AU$2.98 from AU$3.06.

Australian Finance Group shares fell 1% in afternoon trade on Friday.