Post pandemic, ROE of Alliance Bank Malaysia (ABMB) has been trending upwards. ABMB has been gaining loan market shares for consumer, SME and corporate segments with loans growing at a rate that is well above the industry average. The group continues to have healthy NIM of 2.47% in 1HFY25 supported by a high CASA ratio of 40.9%. An interim dividend of 9.5 sen/share (payout of 40%) has been declared in 1HFY25. We maintain our view of a limited upside potential after the recent run up in share price. Maintain HOLD on ABMB with unchanged TP of RM5.30/share based on a CY26 P/BV of 1.0x supported by a blended ROE of 11.1%.

• 1HFY25 earnings within expectation accounting for 50% of our and 49.7% of consensus estimate. Earnings grew by 9.1% YoY in 1HFY25 to RM367mil contributed by stronger income growth of 15.2% YoY, partially offset by higher OPEX and provisions.
• Strong loans growth of 14.8% YoY outpacing the industry's 5.6% YoY expansion with a NIM improvement of 4bps QoQ in 2QFY25. The strong expansion in loan book was contributed by double-digit growths in SME, commercial, corporate and consumer banking loans. 2Q25 NIM rose by 4bps to 2.49%. 6MFY25F NIM at 2.47% but is expected to drop slightly ahead closer to management's guidance of 2.40-2.45% for the full FY25. due to the year-end impact of deposit competition.
• 1HFY25 saw NOII increased by 16.1% YoY underpinned by a stronger wealth management, fx sales, trade fees as well as treasury and investment income. Positive JAW of 3.4% YoY leading to improved CI ratio. OPEX grew 11.8% YoY in 6MFY25 led by higher personnel cost from increase in headcounts, IT spend on strategic initiatives, marketing and administrative expenses. CI ratio improved to 46.4% in 6MFY25 vs. 48% in 6M24, lower than management's guidance of 48% in FY25.
• Improved GIL ratio with a higher annualised net credit cost of 47bps in 1HFY25 (1HFY24: 29bps) due to pre-emptive provisions made of RM33.2mil. With a non-repeat of pre-emptive provisions going forward, credit cost will be lower in 2HFY25. Management maintained its credit cost guidance of 30- 35bps for FY25. Group GIL ratio declined to 2.02% in 2QFY25 from 2.17% in 1QFY25. Slight uptick in delinquency (30 days past due) for SME loans due to slower collection for loans related to the construction, wholesale, and retail sectors. Also, some upticks in 30 days DPD for commercial loans were seen on some construction and real estate loans that were placed under watchlist. Meanwhile, delinquency of consumer loans was stable QoQ.

Source: AmInvest Research - 28 Nov 2024