RHB Research said the bank expects to continue charting above-industry growth rates in the financial year 2025.
PETALING JAYA: Loan growth year-to-date remains strong for Alliance Bank Malaysia Bhd
(ABMB), but net interest margin (NIM) could face pressure from lower asset yields, says RHB Research in a report post a meeting with a representative of the bank.
It said the bank expects to continue charting above-industry growth rates in the financial year 2025 (FY25), albeit at a slower pace versus FY24’s 14%, given the more competitive loan market.
“Geographically, the bank hopes to gain market share in the northern region (manufacturing and semiconductors), Johor (data centre supply chain players) and Sarawak (green power generation).
“However, it has yet to see the trickle-down of foreign direct investment into the banking system and loan applications, though primary contractors involved in domestic infrastructure projects are now more actively looking for financing,” said RHB Research.
On NIMs, it said management noted that the competition for loans has been stiff, and is especially pronounced in the residential mortgage and small-medium enterprise (SME) segments.
Additionally, deposit costs are facing pressure from the digital banks and their aggressive acquisition strategies.
“As a workaround, ABMB will ease up on deposit growth, as it still has a healthy loans-to-funds ratio of 88.9% (FY23: 88%).
“The group will also de-emphasise growth in mortgages and pivot some funds towards treasury assets, which are less capital-intensive and offer profit-taking opportunities in an environment of interest rate cuts.”
According to the research firm, the bank’s asset quality has performed within expectations and that management was working towards some recoveries in FY25.
RHB Research said it continues to favour ABMB among the smaller-cap banks, given its compelling valuation of 0.8 times price-to-book value versus a 10% return on equity. Loan growth prospects are good, while its forecast FY25 dividend yield of 6% to 7% is decent for a fast-growing bank.
