Alliance Bank Malaysia - Improving Asset Quality Trend

Date: 
2024-02-28
Firm: 
AmInvest
Stock: 
Price Target: 
4.10
Price Call: 
BUY
Last Price: 
3.77
Upside/Downside: 
+0.33 (8.75%)

Investment Highlights

  • We upgrade our call on Alliance Bank Malaysia (ABMB) from HOLD to BUY with a revised fair value (FV) of RM4.10/share fro RM3.60/share after rolling forward our valuation to FY25F. Our is pegged to a P/BV of 0.9x, supported by FY25F ROE of 10.5 No changes to our neutral 3-star ESG rating.
  • 9MFY24 earnings of RM513mil were within expectations, maki up 78.4% of our full-year forecast and 76.5% of consensu Hence, our FY24F/25F/26F earnings have been tweaked 0.6%/2.3%/3.6% to reflect a higher loan growth assumption.
  • Net profit declined by 6.4% YoY in 9MFY24, contributed by high operating expenses (OPEX) and allowances for lo impairments. OPEX increased by 13.1% YoY as a result of fro loading of expenses on IT and additional headcount hirings the start of FY24.
  • On QoQ basis, core earnings in 3QFY24 fell by 4.6% to RM177m attributed mainly to a lower non-interest income (NOII) from drop in treasury and investment income.
  • 9MFY24 NOII rose by 15.6% YoY, attributed to stronger clie based fee income that was partially offset by a decline brokerage, investment and trading income.
  • The group reported an annualised net credit cost of 25bps 9MFY24, within management’s guidance of 30-35bps for FY2 BAU provisions of RM246mil were partially offset by the revers in ECL overlays of RM147mil. As of end 3QFY24, to outstanding overlays amounted to RM157mil.
  • 3QFY24 NIM fell by 4bps QoQ to 2.49% due to higher fundi cost. YTD, NIM slipped 16bps to 2.48% for 9MFY24. Manageme alluded that deposit competition is likely to still persist. Th could still put pressure on interest margin in the near term.
  • 9MFY24 CI ratio rose to 48.2% vs. 44.1% in 9MFY23 due to t frontloading of IT expenses and personal cost to support ACCLER8 2027 strategy. Nevertheless, the increase in OPEX likely to taper in the quarters ahead.
  • Loans grew strongly by 12.9% YoY, outpacing the industry expansion of 5.7% YoY. This was contributed by growth in loa from all segments, SME, commercial, corporate and consum banking.
  • Group GIL ratio improved to 2.33% in 3QFY24 from 2.53% 2QFY24. This was supported by marginal QoQ decline in G ratios of commercial, corporate and consumer loans.

Source: AmInvest Research - 28 Feb 2024

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