PETALING JAYA: Alliance Bank Malaysia Bhd
’s management is deliberately shifting toward lower-risk secured and business lending while moderating unsecured consumer growth, says Hong Leong Investment Bank (HLIB) Research.
Consumer loan growth is expected to ease to 7% to 9%, while commercial and corporate loans should sustain double-digit growth.
“This mix shift, alongside intense deposit competition, has prompted management to lower net interest margin guidance for the financial year of 2027 (FY27) to 2.23% to 2.28% from 2.28% to 2.35%.
“Alliance Bank remains on track for 7.5% to 10% loan growth in FY27,” pointed out HLIB Research.
On asset quality, the research house said that while gross impaired loans edged up quarter-on-quarter to 1.83%, management sees no broad-based stress, with pressure largely concentrated in mortgages and credit cards.
With tighter underwriting, intensified collections and continued run-off of legacy unsecured exposures, FY27 credit cost guidance was lowered to 20 to 25 basis points (bps) from 27 to 32 bps.
“We view this trade-off positively, as the sharper focus on risk-adjusted returns should improve balance-sheet resilience and support better credit outcomes.
“Meanwhile, client-based fee income should remain a key earnings growth driver, underpinned by continued traction in wealth management.
“Management also remains committed to investing in technology, artificial intelligence and data, which should support longer-term productivity and operating leverage as the bank enters the final stretch of its ACCELER8 strategy.”
More importantly, HLIB Research said the improved credit outlook and stronger capital position underpin a more constructive capital-return proposition.
CET1 stood at 13% at the end-first quarter of FY27 (1Q27), with the standardised approach for credit risk expected to add 60 to 70bps, creating further headroom above its 12.5% to 13% comfortable range.
While FY27 dividend payout guidance remains at 40% to 50%, management indicated that it is more likely to land towards the higher end and is considering a higher payout versus the past two years.
“Importantly, management favours a sustainably higher recurring payout rather than a one-off special dividend.
“With loan growth still running ahead of the industry and improving risk-adjusted returns becoming a greater priority, we see scope for stronger shareholder distributions as Alliance Bank progresses towards the completion of Acceler8,” it added.
In a separate note, UOB Kay Hian Research said Alliance Bank’s earnings for 1Q27 were in line with expectations.
“We expect earnings momentum to moderate in the remaining quarters as net credit cost normalises from the exceptionally low 0.3 bps recorded in 1Q27.”
Earnings increased 25% y-o-y, driven mainly by substantially lower credit costs.
Revenue rose 2.5%, with net interest and non-interest income both growing 2.5%.
Strong 8.1% loan growth offset a 16 bps net interest margin contraction to 2.26%, while 23% growth in client fees was largely offset by lower treasury income.
Expenses rose 7.8%, resulting in negative operating jaws of 5.3 percentage points and a 1.8% decline in pre-provision operating profit.
Nevertheless, net credit cost fell to 0.3 bps from 14.4 bps, mainly due to corporate recoveries.
