• Keep BUY and MYR4.40 TP, 18% upside and c.6% FY24F (Mar) yield. Alliance Bank unveiled its new ACCELER8 2027 strategy roadmap during the analyst briefing yesterday. Key highlights were a focus on expanding its niche beyond business and SME banking, on top of an 8-10% 4-year loan growth CAGR. We continue to like the bank for its robust earnings growth and resilient asset quality, while its industry-leading CASA mix should allow it to reap maximum benefits from further interest rate hikes.

• ACCELER8 2027 ambitions. Management’s new 4-year roadmap will see ABMB broaden its vision towards becoming “The Preferred Banking Partner”, from a previous focus on SME and business clients. Targeted segments within the consumer banking space include young professionals (High Earners, Not Rich Yet or “HENRY”) as well as high net-worth individuals. ABMB will also be looking to expand its geographical footprint in the Northern states (eg Kedah and Pulau Pinang) as well as East Malaysia. In terms of its competitive advantages, the bank highlighted speed, personalisation, and service excellence as key focus areas for the next four years.

• New financial targets. The bank’s new 4-year loans CAGR target of 8-10% (FY18-22 CAGR: 3.5%) implies above-industry-average pace. ABMB also unveiled a CIR target of 45% in FY27 (1HFY23 achieved: 43.9%), though it advised analysts to expect intermediate spikes in the CIR in the meantime from the additional investments and establishment costs required to realise its ACCELER8 2027 plans. Elsewhere, we are encouraged by its commitment to a 50% dividend payout ratio, but deem its ROE target of 11% to be slightly modest, given it has already achieved 11.6% in 1HFY23, and has a target of >10% for FY23F.

• No changes to earnings and TP. We make no changes to our earnings forecasts pending further clarity from management on the planned investments, but we acknowledge the implied downside risks to our FY24F- 25F. Our TP is maintained at MYR4.40, and is based on a GGM-derived intrinsic value of MYR4.34, with a 2% ESG premium applied as per our in- house methodology. The stock is currently trading at an appealing 0.8x P/BV against a projected FY23F ROE of 10%. We remain upbeat on the stock given its industry-leading CASA mix, robust earnings growth and stable asset quality.

• Key risks to our call include weaker-than-expected loans growth, higher- than-expected impairment allowances, and weaker-than-expected non- interest income.

Source: RHB Research - 12 Jan 2023