AFG not primed for M&As

  • Business
  • Saturday, 21 Jul 2012

KUALA LUMPUR: Alliance Financial Group Bhd (AFG) is not being primed for any near-term mergers and acquisitions (M&A), said Alliance Bank Bhd group chief executive officer Sng Seow Wah.

He downplayed talk of consolidation for the country’s second-smallest bank by market capitalisation.

“I want to make it clear that there is no M&A on the horizon as far as we’re concerned,” he said after a shareholders meeting.

Asked if the bank’s loan-to-deposit ratio of 76% as at end-March gave it comfortable headroom to digest an acquisition, he replied: “The buffer is to protect our stakeholders. It is not for building a warchest for M&A activity.”

Chairman Datuk Oh Chong Peng also said AFG was not privy to the negotiations between Singapore’s DBS Bank Ltd and Temasek Holdings.

“We have no updates. They have not informed us of any progress.”

To recap, DBS had received the nod from Bank Negara in April to begin negotiations with Duxton Investments Pte Ltd, a subsidiary of Temasek, for the latter’s 14.2% equity in AFG.

Duxton, together with Langkah Bahagia Sdn Bhd, a company linked to former finance minister Tun Daim Zainuddin, own a combined 29.06% stake in AFG via Vertical Theme Sdn Bhd, making it the bank’s single-largest shareholder.

On the outlook for loan growth, Sng said it would not be as strong this year as in the previous two years.

“Analysts estimate the industry’s loans will grow 11% to 12%. I think it will be higher, but I’m confident that Alliance Bank’s loans growth will be in line with the industry.

“Just based on the first three months, the signs are positive for us. Loans growth will remain healthy.”

Group chief financial officer Eric Lee noted that 47% of its loans were from the commercial banking side, with more than half going to small and medium enterprises (SME).

Sng said AFG would continue to pursue its niche in SME banking and strengthen non-interest income.

“The areas of opportunity that continue to augur well for us are in the non-interest income front, namely wealth management, bancassurance, transaction banking and treasury.”

One of its star performers last year was the treasury unit, which helped boost non-interest income by 42% in the financial year ended March 31 to RM320.2mil.

“Last year was a good year for treasury. We expect that some of what we did would not be repeated as market conditions are different today, but we have diversified our sources of revenue for non-interest income, for example in treasury sales and wealth management,

“We did that in late 2011, so we should be seeing better traction this year. The same with the bancassurance agreement we signed with AIA in March last year,” Sng explained.

He added that AFG had invested quite heavily in its online banking product, which would be unveiled soon.

“It is in various stages of approval. We’ll talk about it when it’s ready,” he said, adding that the platform would enhance its ability to engage with customers.

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