Alliance Bank Malaysia (ABMB) continues to post a strong 17.3% YoY net profit growth to RM176.7m (+3.8% QoQ), in tandem with its 15.8% YoY increase in revenue. ABMB’s 1QFY25 net profit came in within our and consensus estimates at 24% of our full-year forecasts. We continue to favour ABMB, given its encouraging loans growth momentum that outgrow industry growth. Additionally, we also deem ABMB’s current valuation as attractive, as it is currently trading at an inexpensive forward PE of c.9x. We keep our earnings estimates unchanged, with a higher dividend-based target price of RM4.90 however, as we adjust our cost of equity assumption to 7.2%. Our Trading Buy call on ABMB is maintained.

• Net interest income rose by 15.8% YoY to RM464.7m, thanks to the higher loans volume, which saw an increase of RM53.1m. Meanwhile, non-interest income grew by 15.7% YoY to RM75.1m, predominately driven by higher wealth management income (+36.4% YoY) due to higher commission, supported by foreign exchange sales and trade fees. This had helped to offset the decline in banking services fees.

• Net interest margin (NIM) unchanged at 2.45% (4QFY24: 2.45%), in line with management guidance of 2.40 – 2.45% for FY25. Source of funds remained healthy, with customer deposits growing at 11.6% YoY, mainly driven by higher CASA (+5.5% YoY) and Fixed Deposits (+14.9% YoY). ABMB’s CASA ratio of 41.5% continues to be one of the highest in the industry.

• Loans growth continued its strong momentum, increasing by 14.8% YoY, underpinned by strong growth among Consumer loans (+14.0% YoY to RM28.3bn), led by higher mortgage, personal financing and share margin financing loans growth. Management reiterated its loans growth target of 8-10% for FY25.

• Asset quality. We think that ABMB’s asset quality remains largely under control, despite a slight uptick in GIL ratio to 2.17% (4QFY24: 2.11%) given the decline in newly-impaired loans (figure 4). Furthermore, 67% of the gross impaired loans remain secured, with the balance well provisioned. Net credit cost rose by 1bps YoY to 8.1bps, mainly due to lower overlays write-back which was partially offset by lower BAU provisions. Loan loss coverage ratio is at 111.6%.

Source: PublicInvest Research - 30 Aug 2024