AmBank Research said the banking group will likely declare a second dividend of 11.5 sen per share.
PETALING JAYA: Alliance Bank Malaysia Bhd
(ABMB) is expected to post a 37.3% year-on-year jump in its net profit for the fourth quarter ended March 31, 2024 (4Q24) to RM179mil, bringing its full FY24 earnings to a marginal 2% increase to RM691mil.
According to AmInvestment Bank Research (AmBank Research), the banking group, which is scheduled to announce its FY24 results on May 30, will likely declare a second dividend of 11.5 sen per share. This brings total dividends to 22.3 sen per share or a payout of 50% in FY24.
“We are positive on ABMB, premised on its net interest margin (NIM), which is well above 2% and current account-savings account ratio of 45.1%, one of the highest in the industry,” the research house said.
It expects the group’s NIM in 4Q24 to be stable quarter-on-quarter with cost of funds and asset yields holding up.
AmBank Research added that funding costs remained elevated while housing loan rates continued to be competitive, particularly financing of properties in the primary market.
The research house said NIM for FY24 is likely to come in within the 2.45%-2.5% range.
In terms of non-interest income, client-based fees, which includes wealth management, foreign exchange, trade and banking services, is expected to be stable quarter-on-quarter between RM80mil and RM90mil.
AmBank Research also liked ABMB’s faster pace of loan growth, which exceeded the industry growth rate, while its return on equity (ROE) of 10% was comparable to the larger banking stocks.
In 3Q24, ABMB’s loans grew strongly by 12.9% y-o-y, supported by growth in all segments.
AmBank Research anticipates the strong loan momentum to continue in 4Q24 on the back of the banking system’s stronger loan growth of 5.8% y-o-y in February and 5.7% y-o-y in January, as well as 5.3% y-o-y in December 2023.
It added that credit growth will be supported by expansion of loans in Penang for the technology sector and Sarawak for the infrastructure sector and renewable-energy projects.
The research house pointed out that ABMB saw an improved asset-quality trend as evidenced by the gradual decline in its gross impaired loan ratio from a peak of 2.63% in 1Q24 to 2.33% in 3Q24.
“Stepped up collection efforts and incentives for impaired loans led to an improved asset quality trend for consumer loans.
“Elsewhere, asset quality for small and medium enterprise loans has been holding up while that for commercial and corporate loans gradually trended lower in the last two quarters,” the research house said.
On the back of improved asset quality, AmBank Research factored in a credit cost projection of 25 basis points (bps) for the full FY24, which is lower than the 30-35 bps guided by the banking group.
“We maintain a ‘buy’ call on ABMB with an unchanged fair value of RM4.10 per share, pegging the stock to a price to book value of 0.9 times supported by FY25 ROE of 10.5%.
“Our FY24 earnings forecast been raised by 4.3% to reflect a higher non-interest income estimate and lower credit cost. For FY25, net profit has been tweaked lower by 1.7% to account for slightly higher cost-to-income ratio expectation,” AmBank Research said.
