PETALING JAYA: Alliance Bank Malaysia Bhd
(ABMB) is on track to meet its financial year ended March 31, 2026 (FY26) loan growth target of 8% to 10%, underpinned by a robust pipeline and continued momentum.
Hong Leong Investment Bank (HLIB) Research said that despite escalating geopolitical tensions, momentum is driven by the retail mortgage segment which will enable cross-selling and small and medium enterprise (SME) expansion, adding circa 700 new clients monthly.
While FY26 net interest margin (NIM) is expected to compress by circa three to six basis points from its previous guidance of 2.37% to 2.43% – owing to higher funding costs and a shifting loan mix – the bank’s tactical decision to “pre-fund” deposits earlier in the year has optimised its loan-to-funding ratio to 87%, providing flexibility to defend margins against year-end competition, it added.
HLIB Research noted that the bank’s management remains confident in attaining its revised full-year NIM guidance of 2.34% to 2.37%.
“We came away from our recent management meeting with ABMB feeling cautiously optimistic on its growth trajectory,” HLIB Research said.
An analyst who also covers the lender said he, too, was positive that the bank would be able to meet most of its key performance indicators despite a challenging environment.
“I like ABMB for its SME portfolio which brings in higher yields,” he told StarBiz, adding that the bank – one of the smallest in the country – was fairly prudent.
Meanwhile, HLIB Research in its report said ABMB, shielded by a gross impaired loan ratio of 1.89% and a diversified loan book with negligible exposure to oil and gas (less than 0.5%), remains well-buffered.
“We believe its loan portfolio is insulated against crude oil price volatility, supported by RM146mil in management overlays. However, global supply disruptions may still pressure the SME segment.”
HLIB Research said the Basel III implementation in July is projected to provide a 15 to 20 basis points uplift to the Common Equity Tier 1 ratio.
ABMB reiterated its 40% to 50% dividend payout policy, as released capital will be prioritised to support higher-than-industry loans growth, it said.
Driven by organic growth, the bank expects FY26 return on equity (ROE) to sustain at about 10%.
HLIB Research has maintained its “buy” call on the lender with a target price of RM5.70, premised on one time 2027 price-to-book based on an ROE assumption of 9.6%.
This valuation sits slightly below the five-year pre-Covid-19 mean of 1.1 times, and HLIB Research believes a re-rating could be on the cards, catalysed by merger and acquisition news flow following the recalibrated 30% target stake from its Singaporean suitor, DBS Group Holdings Ltd.
The Singaporean lender was reported to be interested in buying Vertical Theme Sdn Bhd’s 29.06% stake in ABMB.
Vertical Theme is the bank’s biggest shareholder.
The research house said it continues to like ABMB for its high-yielding SME portfolio and prudent provisioning buffers.
Following housekeeping of its dividend payout assumptions, HLIB Research said it has revised its FY26 to FY28 dividend per share higher by 9%, 10%, and 8%, respectively.
At last look, ABMB was at RM4.62 apiece, valuing the entire lender at RM7.9bil.
