Alliance Bank's brokerage disposal could support dividend payout

KUALA LUMPUR: Alliance Bank Malaysia Bhd's disposal of its stockbroking business in Alliance Investment Bank to Phillip Futures could support dividend payout and allow the bank to redeploy capital, said RHB Research.

In a note, the research firm said it estimated that the divestment would add 50-55bps to CET-1 ratio, which was 15.6% as at end-September 2021.

"A boost to the already high CET-1 ratio puts ABMB in a good position to return to pre-Covid-19 dividend payout of 48% in the near term. Recall that dividend payout has been raised to 40% of 1HFY22 earnings," it said.

However, RHB added that it does not expect special dividends from the proposal as the one-off disposal gain from the 12-month 60% fee is expected to be negligible.

Furthermore, Alliance Bank has said excess capital from the sale will be redeployed to accelerate growth in its consumer SME and Islamic banking businesses.

There would be little downside from the divestment, as according to RHB, the brokerage operations made minimal contributions to the group's income.

The research firm noted that 1HFY22 contribution from brokerage fees was only about RM12mil or 1.3% of the group's total operating income.

Meanwhile, the higher trading stamp duty of 15bps from 10bps and the abolishment of the RM200 stamp duty limit on each contract note is likely to dampen trading activities.

"ABMB would also benefit from the strategic stockbroking partnership arrangement with Phillip Capital Group, which allows ABMB’s customers to access to regional trading platforms and a broad range of global investment products," said RHB.

Post-announcement, RHB maintained its "buy" recommendation on Alliance and its target price of RM3.10.
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