PETALING JAYA: Alliance Bank Malaysia Bhd
’s dividend outlook is likely to remain intact, according to Kenanga Research.
The research house said rising Malaysian Government Securities (MGS) yields in the third quarter of 2026 (3Q26) have applied downward valuation pressure on banks’ bond portfolios, but the overall impact on common equity tier one (CET1) capital ratios remains highly manageable.
Kenanga Research said it maintains a 50% payout ratio for the bank.
“We estimate that there would be about 1% earnings impact potential on fixed income securities under FVTPL classification due to the higher bond yields in 3Q26, which is small versus other banks,” it noted.
It added that based on CET1 levels of 13.4%, its calculation indicates an MGS rate rise could still allow CET1 to sit comfortably above 13%.
In addition to that, Kenanga Research said the bank could catapult its wealth management business.
“Alliance has focused on building deposits and new-to-bank customers by leveraging mortgages, welcoming about 7,000 new customers a month,” it pointed out.
The bank’s loan financing across the region has been tracking well at a 8% year-on-year growth, whereby it includes financing for data centres as well.
However, on the personal financing side, the bank has become more selective.
Kenanga Research said it expects more keen competition to lock in longer-term deposits due to expectations of an overnight policy rate hike after the US Federal Reserve increased rates.
“Thus, we are comforted to note that deposit competition trends so far, especially fixed deposits, remain at levels commensurate with the net interest margin (NIM) guidance of 2.23% to 2.28% that had been revised lower during the results briefing,” the research house explained.
The NIM buffer is able to balance out NIM pressure, which is crucial as loan pipelines stay on course as per its guidance.
Meanwhile, the research house pointed out another area where Alliance could seek out potential capital improvements include the evaluation and utilisation of collateral for lending. It also said the bank could be more disciplined in off-balance sheet commitments towards lower risk-weighted assets and better CET-1.
With that, it has maintained its forecasts and an “outperform” call with a target price of RM5.50 on the stock.
