Investment Highlights

• We maintain HOLD on Alliance Bank Malaysia (ABMB) with an unchanged fair value (FV) of RM3.60/share. Our FV is pegged to a P/BV of 0.8x, supported by FY24F ROE of 9.6%.

• We made no changes to our earnings estimate as 6M24 earnings of RM336mil were within expectations, making up 51.3% of our full-year forecast and 50.3% of consensus estimate.

• 6M24 underlying earnings fell 9.4% YoY due to higher operating expenses (OPEX) and loan provisions, which more than offset an increase in net interest (NII) and non-interest income (NOII).

• On QoQ basis, core earnings in 2Q24 climbed 23.1% to RM185mil driven by higher NII from acceleration in loan growth and improved NIM. 2Q24 saw a ramp up in gross LD ratio to 99.3% vs. 96.1%. Also, it was contributed by stronger NOII as a result of higher treasury, investment and fee income which included fees received from the extension of its bancassurance partnership with Manulife.

• 6M24 NOII rose 15.2% YoY, attributed to stronger clientbased fee, treasury and investment income that was partially offset by a decline in brokerage.

• The group reported an annualised net credit cost of 29bps in 6M24, in line with management’s guidance of 30-35bps for FY24F. BAU provisions of RM170mil were partially offset by reversal in ECL overlays of RM96.3mil. As at the end of 2Q24, total outstanding overlays amounted to RM208mil.

• 2Q24 NIM rose 10bps QoQ to 2.53%, attributed to improved management of funding cost, loan mix and expansion of loans without sacrificing yields.

• Opex in 6M24 grew 13.9% YoY, largely contributed by higher personnel cost from adjustment of wages for unionised workers under collective agreement in 1Q24 and higher headcounts to support business growth under the ACCELER8 2027 strategy. 6M24 CI ratio rose to 48% vs. 43.9% in 6M23. 2H24 is likely to see lower growth in OPEX than 1H24 due to the non-repeat of additional hiring expenses.

• Loan growth accelerated to 10% YoY, outpacing the industry’s expansion of 4.3% YoY. This was contributed by a pickup in pace of loans from all segments, SME, commercial, corporate and consumer banking.

• Group GIL ratio declined in 2Q24 to 2.51% from a peak in 1Q24 of 2.63%. This was supported by a marginal QoQ decline in GIL ratios of SME, commercial, corporate and consumer loans. Delinquency rates (30+ days past due) remained elevated for key loan segments.

• 1st interim dividend of 10.85 sen/share (payout: 50%) has been declared.

Source: AmInvest Research - 1 Dec 2023