Investment Highlight

• We maintain our BUY recommendation on Alliance Bank Malaysia (ABMB) with a revised fair value of RM2.90/share (previously: RM2.95/share). Our fair value is based a lower FY22 ROE of 7.8% (previously 8.2%), implying a P/BV of 0.7x. We tweak our FY22/23 net profit lower by 3.9%/5.8% after adjusting our estimate for NIM higher but reduce our NOII forecast.

• Targeted assistance granted to borrowers impacted by Covid-19 continued to rise to RM7.0bil (16.0% of loan book) in 4Q21 from RM6.3bil in the preceding quarter. Nevertheless, the increase was smaller compared to the earlier quarters with a comforting note that loan repayments for 97.0% of its total loans have resumed.

• The group delivered a lower net profit of RM50mil (-50.2% QoQ) in 4Q21, contributed by lower NOII (drop in treasury and investment income) and higher operating expenses.

• 12M21 net profit came in at RM359mil (-15.4% YoY), attributed to higher provisions largely to build up a RM312.7mil provision buffer despite higher total income.

• Cumulative earnings were above our expectation, accounting for 125.0% of our estimates. However, it was below consensus number, making up only 93.6% of street projection.

• Operating expenses (opex) for 12M21 was tightly managed with a decline of 0.8% YoY from lower personnel cost. Correspondingly, CI ratio improved to 44.1% for 12M21. 12M21 saw a positive JAW of 8.4% YoY.

• Gross loan growth remained subdued at 1.1% YoY in 4Q21 and continued to lag that of the industry which grew by 3.9% YoY.

• 4Q21 saw NIM improved by 15bps QoQ to 2.46% from a lower funding cost from optimisation of deposit mix. The group’s GIL ratio declined to 2.34%. 4Q21 saw stable GIL ratios for personal financing QoQ while that of classic mortgage and AOA loans improved marginally QoQ. Meanwhile, asset quality for SME, commercial and corporate loans were stable QoQ.

• Further provisions booked in 4Q21 of RM89.1mil (overlay) brought the total management overlay provisions to RM312.7mil for 12M21. For 12M21, credit cost was 1.21% (based on total provision s of RM533mil) of which 0.71% or 59% was for management overlay. Credit cost came in within management’s guidance of 1.20%-1.25%.

• An interim dividend of 5.79 sen/share has been proposed (payout: 25.0%) for FY21. On an absolute basis, it was lower than FY20’s 6.0 sen/share (payout: 22.0%).

Source: AmInvest Research - 1 Jun 2021