KUALA LUMPUR: Alliance Bank Malaysia Bhd
is expected to continue its robust loan growth and stable net interest margin (NIMs) in the second quarter of financial year 2025 (2Q FY2025), said Maybank Investment Bank Bhd (Maybank IB).
The investment bank said industry deposit competition had somewhat abated in 3Q 2024, and it expects Alliance Bank's NIM to have been relatively stable in 2Q FY2025, against its NIM of 2.45 per cent in 1Q FY2025.
"Nevertheless, deposit competition has intensified into 4Q 2024, as it seasonally does, and we expect some NIM pressure in the last quarter of this year.
"Overall, however, we expect Alliance Bak’s NIMs to trend within management’s guidance of between 2.40 per cent and 2.45 per cent in FY2025, which would imply a year-on-year (y-o-y) compression of 3.0-8.0 basis points (bps)," it said in a note today.
Meanwhile, the bank's target loan growth of 8.0 per cent to 10 per cent for FY2025 appears achievable, with robust growth across all business segments, particularly small and medium enterprises (SMEs) lending, which Maybank IB expects to advance at a double-digit pace.
Maybank IB raised Alliance Bank's FY2025 loan growth forecast to 9.0 per cent from 8.0 per cent previously.
However, credit cost is likely to remain elevated following some pressure on asset quality.
The group’s gross impaired loans (GILs) rose a marginal 5.0 per cent q-o-q at end-June 2024, largely on account of defaults associated with its Alliance ONE Account.
"We expect the uptrend in GILs to persist, but on a gradual basis.
"Net credit cost was 32 bps in 1Q FY2025 and as some pressure on asset quality is likely to persist, we have maintained an elevated credit cost assumption of 35 bps for FY2025, which is at the higher end of management’s guidance of 30-35 bps," it said.
Maybank IB upgraded Alliance Bank to a "Buy” call from "Hold” with a higher target price of RM5.30 from 4.60 previously. - Bernama
