KUALA LUMPUR (Aug 29): Alliance Bank Malaysia Bhd, which reported lower quarterly earnings on Tuesday, said pressure on net interest margin (NIM) will remain due to deposit pricing and competition.

The group's net profit fell 29.04% to RM150.54 million for the first quarter ended June 30, 2023 (1QFY2024), from RM212.16 million a year earlier, while revenue declined 1.65% to RM466.26 million from RM474.07 million.

NIM came down to 2.43% from 2.57% previously, the group's bourse filing showed.

Although net interest income increased by RM9.3 million year-on-year due to higher loan growth and an increase in the overnight policy rate (OPR), Alliance Bank's other operating income declined 20.8% to RM64.9 million due to lower treasury and investment income.

“Operating expenses increased by RM19.5 million or 9.3% year-on-year mainly from the higher personnel cost, marketing cost and establishment cost.

“The group's allowance for expected credit losses on loans, advances, financing and other financial assets recorded a net charge of RM34.8 million, a decrease of RM52.2 million year-on-year mainly due to a recovery of RM17.3 million from a large account during the last corresponding quarter,” said the group.

Alliance Bank's cost-to-income ratio rose to 49.3% from 44.4%, while the current account/savings account (CASA) ratio stood at 43.9%.

Its customer-based funding totalled RM53.7 billion, while liquidity coverage ratio stood at 163.2% and its loans-to-funds ratio at 85.8%.

“We continued to maintain a robust capital position. The Common Equity Tier-1 (CET 1) ratio stood at 13.7%, Tier-1 Capital Ratio at 14.6% and Total Capital Ratio at 18.5%, well above regulatory requirements,” the group said.

On prospects, Alliance Bank said it remains cautious and mindful of downside risks to growth stemming from external uncertainties, especially escalating geopolitical tensions and tightening financial conditions.

“Notwithstanding the above, under (its) Acceler8 strategic plan, the group expects to broaden its focus and expand into new areas beyond SMEs to accelerate its growth and pay more attention to consumer banking, wealth management and Islamic Banking.

"The group will also continue to build strategic partnerships to widen its product offering and distribution, create more value for its customers and expand its business presence in fast-growing states and secondary cities to capture the growth opportunities of these economic corridors," said Alliance Bank.

It added that it aims to launch itself into the top quartile in the industry for return on equity, with prudent loan growth above the industry average, strong credit risk management, controlled loan loss provisions, and a strengthening of the deposit/CASA proposition and cost management.

Shares of Alliance Bank finished two sen or 0.57% higher at RM3.53 on Tuesday, valuing the group at RM5.46 billion.