Investment Highlights

• We maintain BUY on Alliance Bank Malaysia (ABMB) with a revised fair value (FV) of RM4.30/share from RM4.10/share. This is largely after adjusting our BV estimate, taking into account the actual total equity value in FY24. Our FV is pegged to a P/BV of 0.9x supported by FY25F ROE of 10.1%.

• We fine-tuned FY25F/26F earnings by +0.9%/-1% to reflect a slightly higher estimate of non-interest income (NOII) and CI ratio.

• FY24 earnings of RM690mil were within expectations, coming in almost on the dot of our forecast and 3% above consensus estimate.

• Net profit grew 1.9% YoY in FY24, contributed by stronger net interest (NII) and NOII together with lower provisions, partially offset by increase in operating expenses (OPEX).

• On QoQ basis, net profit in 4QFY24 came in at RM178mil (+0.5%%) with higher NII and NOII, partially offset by increase in OPEX and allowances for loan losses. This was in line with our forecast of RM179mil earnings in 4QFY24 in our earlier report on 15 Apr 2024.

• FY24 NOII rose by 12.4% YoY, attributed to stronger wealth management, fx sales, trade and banking services fees, partially offset by a decline in treasury, investment and brokerage income.

• 4QFY24 NIM slipped by 4bps QoQ to 2.45% due to higher funding cost with the growth in FDs outpacing CASA. In FY24, NIM declined 16bps to 2.48% and was within management’s guidance of 2.45%-2.50%. Management guided that NIM in FY25F will lower at 2.40%-2.45%, but at a lower compression than FY24. This will be on the back of changes to asset mix (increase in treasury securities) and liability composition between CASA and FDs.

• FY24 OPEX grew 10.5% YoY, led by higher personnel, IT and marketing expenses. As a result, CI ratio climbed to 48.2% in FY24 vs. 45.9% in FY23, slightly exceeding the target of 48%.

• Loans grew strongly by 13.6% YoY, outpacing the industry’s 6% YoY. This was contributed by growth in loans from all segments, SME, commercial, corporate and consumer banking.

• The group reported an annualised net credit cost of 26bps in FY24, which was lower than management’s guidance of 30- 35bps for FY24. BAU provisions of RM317mil were partially offset by reversals in management overlays of RM183mil. Total remaining overlays stood at RM121mil, and this amount is likely to be retained going forward without further reversals.

• Group GIL ratio improved to 2.11% in 4QFY24 from 2.33% in 3QFY24. This was supported by the improvement in asset quality of commercial, corporate and consumer loans. For consumer loans, 4QFY24 saw lower delinquency ratios of classic mortgage, personal financing and Alliance ONE Account (AOA).

• 2nd interim dividend of 11.45 sen/share has been declared, bringing FY24 dividends to 22.3 sen/share (payout: 50%) in line with forecast.

Source: AmInvest Research - 31 May 2024