Investment Highlights

• We maintain BUY on Alliance Bank Malaysia (ABMB) with a higher fair value (FV) of RM4.80/share from RM4.30/share. This is largely after rolling forward our valuation to FY26F. Our FV is pegged to a P/BV of 1x supported by FY26F ROE of 10.5%.

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

• 1QFY25 earnings of RM177mil were within expectation accounting for 24.1% of our full-year estimate and 24% of consensus’.

• Earnings grew strongly by 17.3% YoY in 1QFY25, contributed by stronger net interest (NII) and non-interest income (NOII), partially offset by higher OPEX and allowances for loan losses.

• NII grew 15.8% YoY to RM465mil, supported by strong loan growth while NIM improved marginally by 2bps YoY to 2.45%.

• On QoQ, 1QFY25 NIM was flat 2.45% but was within management’s guidance of 2.40-2.45% for the full FY25.

• 1QFY25 saw NOII increased by 15.7% YoY to RM75mil, attributed to stronger wealth management, fx sales, trade fees as well as treasury and investment income. Meanwhile, banking services and share trading fees declined in the quarter.

• OPEX grew 12.7% YoY, led by higher personnel cost from increase in headcounts, IT spend on strategic initiatives coupled with rise in marketing and administrative expenses. Nevertheless, with stronger income growth, CI ratio improved to 48% in 1QFY25 vs. 49.3% in 1QFY24, in line with management’s guidance.

• Loans grew strongly by 14.8% YoY, outpacing the industry’s 6.4% YoY. This was contributed by strong double-digit growth in SME, commercial and consumer banking loans. Also, corporate banking loans grew by a commendable 9.7% YoY.

• The group reported an annualised net credit cost of 32bps in 1QFY25 (1QFY24: 28bps), within management’s guidance of 30bps-35bps for FY25. The higher credit cost was due to lower writebacks in management overlays and higher BAU provisions for consumer, SME and commercial loans. Total balance of management of overlays was RM121mil.

• Group GIL ratio inched up slightly to 2.17% in 1QFY25 from 2.11% in 4QFY24. This was due to an uptick in GIL ratio for consumer loans coming from Alliance ONE Account (AOA).

Source: AmInvest Research - 30 Aug 2024