Investment Highlight

• We maintain BUY on Alliance Bank Malaysia Bhd (ABMB) with an unchanged fair value (FV) of RM4.60/share based on FY24 ROE of 11.3% implying a P/BV of 1.0x.

• We make no changes to our earnings estimate as 12MFY22 earnings were within expectations, just 3% above our estimate. Meanwhile, it exceeded consensus estimate, 11% above street’s projection.

• For 12MFY22, ABMB’s core earnings climbed 76% YoY to RM632mil. The improved earnings were supported by higher total income and lower provisions of 59% YoY.

• Opex for 12MFY22 grew modestly by 2.8% YoY due to higher personnel, IT and admin expenses. 12MFY22 saw a stable CI ratio of 44.1%.

• NIM expanded by 23bps YoY to 2.53% driven largely by lower funding cost from deposit optimisation and reprising of deposits. Every 25bp hike in OPR will lift the group’s NIM by 4bps or RM20mil in interest income.

• The group’s GIL ratio declined to 1.8%.

• Annualised credit cost based solely on loan impairments was significantly lower at 47bps in 12MFY22. It was within management guidance of <55bps for FY22.

• The group recorded a lower 4QFY22 core net profit of RM114mil (-32% QoQ). Net interest income (NII) declined, attributed to lower treasury asset yield. Meanwhile, investment and trading income was lower QoQ. Also, contributing to the lower earnings were higher provisions as the group topped up its management overlays by another RM20mil.Total management overlays now stands at RM450mil.

• Gross loan growth accelerated to 4.6% YoY in 4QFY22 (3QFY22: 3% YoY) in line with industry growth. Loan expansion was supported by growth in SME, corporate and commercial banking loans. Meanwhile, consumer loan growth was subdued.

• Dividend payout continued to normalise to the prepandemic level. A 2nd interim dividend of 10.2 sen/share has been declared, bringing total dividends to 18.5 sen/share (payout: 50%) for FY22. This was close to our estimate of 17 sen/share.

Source: AmInvest Research - 1 Jun 2022