PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 24 Feb 2020, 10:29 AM


Alliance Bank Malaysia Berhad - Collaborates With Zurich Malaysia

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The Group announced the signing of exclusive 15-year bancassurance and banctakaful agreements with Zurich General Insurance Malaysia Berhad and Zurich General Takaful Malaysia Berahd. This comes about as part of its effort to further strengthen its position in providing financing solutions for both its individual and small and medium enterprise (SME) communities. The deal will reportedly net the Group additional income of RM200m over the 15-year period. We keep our earnings estimates unchanged at this juncture nonetheless, with this enhancement a part of our non-interest income growth assumptions. We continue to like the Group for its earnings prospects, underpinned by above-average net interest margins and relatively healthy asset quality and affirm our Outperform. Target price of RM4.80 is also unchanged.

  • Scope of cooperation will see, effective 1 May 2019, Zurich Malaysia’s general insurance and general takaful products offered throughout Alliance Bank’s 81-branch network nationwide, and marketed by its 860-strong sale force as well as through its digital channels. Initial coverage will start with protection against fire damage for individuals and commercial property owners, followed by SME and personal insurance. This suite of new products will expand on its current offering in its present tie up with Manulife Insurance in a 10-year strategic agreement signed in June 2013 to offer savings and income plans, home protection and motor assurance plans as well as credit life and commercial insurance plans amongst others. This tie-up with Manulife is reportedly netting the Group RM70m over the 10-year period.
  • Bancassurance arrangements have grown in significance in recent years, with it making economic sense for both parties involved. For banks, it offers greater income stability, helps to expand product offering while also making more productive use of its customer database and branch network. For the insurer, the arrangement naturally helps to expand its customer base, enhance its ability to segmentalize its market to support more effective product design and marketing effort, as well as lower its distribution cost. While the Group’s total non-interest income contribution still only makes up about 15% of total income, fee-based income from the “insurance, bancassurance, structured investments and unit trust fees” segment is growing in significance. As a % of non-interest income fee-based composition, the mix has grown from about 14% in FY15 to 22% in FY18.

Source: PublicInvest Research - 23 Apr 2019

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