4QFY22 Results (Below)| Wednesday, 01 June 2022

Alliance Bank Malaysia Berhad Maintain NEUTRAL

(2488 | ABMB MK) Financial Services | Finance

Asset quality shows marked improvement Unchanged Target Price: RM3.72

KEY INVESTMENT HIGHLIGHTS

• Earnings were below expectations
RETURN STATISTICS
• Asset quality has improved significantly
• FY22 provisions sharply decrease
Price @ 31st May 2022 (RM) 3.60
• Lukewarm loan growth
• Poor deposit growth, though CASA growth is strong Expected share price return (%) 3.2
• Dividend announced, payout at 50%
Expected dividend yield (%) 6.1
• Maintaining our earnings forecasts
• Maintain NEUTRAL call with unchanged TP of RM3.72
Expected total return (%) 9.3

Below expectations. ABMB’s FY22 core net profit of RM573 came in SHARE PRICE CHART
below our expectations but within consensus’, making up 93% and
101% of full-year earnings forecast respectively.

FY22’s earnings rose by +60%yoy on the back of higher NII and lower
provisioning, in spite of poorer NOII, OPEX and higher tax rates.

RA loans. Currently outstanding RA loans are valued at RM6.3b (13.6%

of loan book), having fallen from RM9.3b in Feb-22. PEMULIH loans
make up 92% of the amount.
Share price performance (%) Absolute Relative
Of the PEMULIH programme graduates, 4% have missed repayment so
1 month -4.8 -2.9
far.
3 months -4.3 6.7
Asset Quality. GIL declined to a comfortable 1.85% [FY21: 2.34%], 12 months 39.0 40.4
with upticks seen in commercial and corporate portfolios. On the other
hand, consumer GIL has reduced while SME GIL remains stable. KEY STATISTICS
FBM KLCI 1,570.10
Provisions. Provisions have come down 121bps in FY21 to 48bps in
Syariah compliant No
FY22. MEV has been reduced due to improved macroeconomic
F4GBM Index Yes
conditions while consumer banking provisions have been reduced in
ESG Grading Band (Star rating) ☆☆☆
lights of improved delinquency rates. On the other hand, the group has
Issue shares (m) 15481.11
stocked up on management overlays for high risk sectors and increase
Estimated free float (%) 57.51
loan modifications.
Market Capitalisation (RM’m) 5,573.18
Loan growth. Gross loans have grown by +4.6%yoy driven by SME 52-wk price range RM2.32 - RM3.82
and corporate & commercial banking segments. On the other hand, Beta vs FBM KLCI (x) 0.90
consumer banking has contracted as the group seeks to readjust its Monthly velocity (%)
0.00
targets and priorities.
Monthly volatility (%) 17.35
Deposit growth. Customer deposits have shrunk by -0.6%yoy, though 3-mth average daily volume (m) 2.37
CASA has risen by +3.4%yoy. FDs remain the core driver to deposit 3-mth average daily value (RM’m) 8.59
growth. Top Shareholders (%)
Vertical Theme Sdn Bhd 29.06
NII and NIM. FY22’s total NII rose by 8.8%yoy due to NIMs rising
Employees Provident Fund Board 11.39
substantially by +23bps to 2.53%. This was largely driven by deposit
GLOBAL SUCCESS NETWORK 4.80
optimisation and repricing of FDs post-OPR cuts.

MIDF Research
research@midf.com.my
Alliance Bank Malaysia Berhad

Wednesday, June 01, 2022

NOII. FY22’s NOII fell by -15.2% as poor treasury and investment income, brokerage fees offset FX sales and trade fees.

Operating expenses. The group’s CIR ratio remained flattish at 44.1% due to higher net income offsetting similarly
rising OPEX. OPEX rose by +2.8%yoy due to more investments in sales force and collections team expansion as well as
higher IT expenses

Capital ratios. The group’s CET-1 ratio is at a high 16.0% in this quarter.

Dividend announced. ABMB announced a dividend of 10.2 sen, bringing FY22’s total to 18.5 sen, which were close to
our forecasts. This implies a payout of 50%.

Earnings maintained. Given that results were within expectations, we do not revise our earnings forecasts.

zValuation and recommendation. We remain optimistic on ABMB’s long-term prospects as it rebuilds its loan book to
one that priorities asset quality, as well as effective cost management. However, in the medium term, we believe that the
counter is mostly priced in. Thus, we maintain our NEUTRAL recommendation with an unchanged TP of RM3.72. For
our valuation we peg ABMB’s FY23 BPS to an unchanged PBV of 0.8x.
Alliance Bank Malaysia Berhad

Wednesday, June 01, 2022

INVESTMENT STATISTICS
FYE Mar (RM m) FY21 FY22 FY23F FY24F FY25F
Net interest income 1,017 1,122 1,208 1,270 1,355
Islamic Banking income 379 398 405 422 434
Other operating income 422 349 376 399 424
Total income, incl. 1,818 1,868 1,990 2,091 2,213
mod loss
PPOP 1,017 1,045 1,066 1,096 1,159
Pretax profit 484 827 909 966 1,023
Net profit 359 573 679 722 764
Core Net profit 359 573 679 722 764
, , , , ,
Total NII 1,361 1,480 1,592 1,677 1,777
Total NOII 457 387 398 414 436
Gross loans 44,147 46,189 47,999 50,021 51,993
Customer deposits 48,489 48,186 50,091 52,181 54,344
, , , , ,
Financial ratios (%) , , , , ,
Profitability , , , , ,
NIM 2.30 2.53 2.05 2.06 2.11
NOII/Total income 25.1 20.7 20.0 19.8 19.7
Return on Interest-earning 3.20 2.97 3.45 3.62 3.77
Assets
Cost of funds 1.46 1.06 1.51 1.70 1.79
ROAE 5.9 9.0 10.0 9.8 9.9
ROAA 0.6 0.9 1.1 1.1 1.1
, , , , ,
Liquidity & Efficiency , , , , ,
Cost-to-income ratio 44.1 44.1 46.5 47.6 47.6
Loan/Deposit ratio 89.2 93.6 96.0 96.0 95.8
CASA ratio 47.0 48.9 47.5 46.5 45.5
, , , , ,
Asset Quality & Capital , , , , ,
GIL ratio 2.34 1.85 2.50 2.40 2.32
Loan loss coverage ratio 97.6 135.9 124.0 110.2 105.5
CET 1 16.5 16.0 15.8 15.6 15.4
Tier 1 capital 16.5 16.9 16.7 16.5 16.2
Total capital 21.8 21.0 20.6 20.3 20.0
, , , , ,
Growth , , , , ,
Total NII 2.8 8.8 7.6 5.3 6.0
Total NOII 24.8 (15.2) 2.7 4.0 5.3
OPEX (0.8) 2.8 12.4 7.6 5.9
PPOP 15.3 2.7 2.0 2.8 5.7
Core net profit (15.4) 59.7 18.5 6.3 5.9
Gross loans 1.1 4.6 3.9 4.2 3.9
Customer deposits 0.1 (0.6) 4.0 4.2 4.1
, , , , ,
Valuation ratios , , , , ,
Core EPS (sen) 23.2 37.0 43.8 46.6 49.3
Gross DPS (sen) 5.8 18.5 21.9 23.3 24.7
Dividend yield (%) 1.6 5.1 6.1 6.5 6.9
Book value per share (RM) 4.0 4.1 4.6 4.9 5.1
PBV (x) 0.9 0.9 0.8 0.7 0.7
Source: Company, MIDFR
Alliance Bank Malaysia Berhad

Wednesday, June 01, 2022

EXHIBIT 1: QUARTERLY RESULTS

FYE Mar (RM m) 4QFY22 3QFY22 4QFY21 Yoy (%) Qoq (%) FY22 FY21 Yoy (%)

Net interest income 276 295 267 3.3% -6.3% 1,122 1,017 10.3%
Islamic banking income 95 107 98 -2.4% -10.8% 398 379 5.0%
Non-interest income 80 79 81 -0.9% 1.9% 349 422 -17.5%
Net income 452 480 446 1.3% -6.0% 1,868 1,818 2.8%
OPEX (219) (215) (232) -5.6% 1.9% (823) (801) 2.8%
PPOP 232 265 214 8.8% -12.3% 1,045 1,017 2.7%
Loan provisions (72) (14) (136) -46.9% 434.2% (214) (531) -59.6%
Other provisions (2) (1) (0) n.m. n.m. (3) (2) n.m.
Profit before tax 159 250 77 105.6% -36.6% 827 484 70.9%
Net profit 103 151 50 105.8% -31.8% 573 359 59.7%
Core net profit 103 151 50 105.8% -31.8% 573 359 59.7%

Total NII 367 390 358 2.5% -5.8% 1,480 1,361 8.8%
Total NOII 84 90 88 -3.7% -6.4% 387 457 -15.2%

DPS (sen) 10.2 - 5.8 n.m. n.m. 18.5 5.8 n.m.

EPS (sen) 6.7 9.8 3.2 105.8% -31.8% 37.0 23.2 59.7%
Gross loans 46,189 44,515 44,147 4.6% 3.8%
Gross impaired loans 853 899 1,032 -17.4% -5.0%
Customer deposits 48,186 46,425 48,489 -0.6% 3.8%
CASA 23,577 23,235 22,800 3.4% 1.5%
Source: Company, MIDFR

EXHIBIT 2: QUARTERLY FINANCIAL RATIOS

Yoy Qoq Yoy
Financial Ratios (%) 4QFY22 3QFY22 4QFY21 FY22 FY21
(+/- ppts) (+/- ppts) (+/- ppts)

NIM (Reported) 2.50 2.66 2.41 0.09 -0.16 2.53 2.30 0.23
NOII/Total income 18.7 18.8 19.6 -1.0 -0.1 20.7 25.1 -4.4
Ann. ROE 6.4 9.4 3.2 3.2 -3.0 8.9 5.7 3.2
Cost-to-income ratio 48.5 44.8 52.1 -3.6 3.7 44.1 44.1 0.0
Ann. net credit cost (bps) 62.4 12.8 120.4 -58.0 49.6 48.1 121.4 -73.3
GIL ratio 1.85 2.02 2.34 -0.49 -0.17
Loan loss coverage 135.9 121.7 97.6 38.4 14.3
L/D ratio 93.6 93.7 89.2 4.5 -0.1
Gross loan growth, yoy 4.6 3.0 1.1 3.5 1.6
Customer deposit growth, yoy (0.6) 0.7 0.1 -0.8 -1.4
CET1 16.0 16.5 16.2 -0.2 -0.6
Source: Company, MIDFR
Alliance Bank Malaysia Berhad

Wednesday, June 01, 2022

MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (197501002077 (23878 – X)).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)

DISCLOSURES AND DISCLAIMER

This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (“MIDF Investment”) for distribution to and use by its
clients to the extent permitted by applicable law or regulation.

Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on
information obtained or derived from sources that MIDF Investment believes are reliable at the time of publication. All information,
opinions and estimates contained in this report are subject to change at any time without notice. Any update to this report will be
solely at the discretion of MIDF Investment.

MIDF Investment makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the
information contained therein and it should not be relied upon as such. MIDF Investment and its affiliates and related companies and
each of their respective directors, officers, employees, connected parties, associates and agents (collectively, “Representatives”) shall
not be liable for any direct, indirect or consequential loess, loss of profits and/or damages arising from the use or reliance by anyone
upon this report and/or further communications given in relation to this report.

This report is not, and should not at any time be construed as, an offer, invitation or solicitation to buy or sell any securities,
investments or financial instruments. The price or value of such securities, investments or financial instruments may rise or fall.
Further, the analyses contained herein are based on numerous assumptions. This report does not take into account the specific
investment objectives, the financial situation, risk profile and the particular needs of any person who may receive or read t his report.
You should therefore independently evaluate the information contained in this report and seek financial, legal and other advice
regarding the appropriateness of any transaction in securities, investments or financial instruments mentioned or the strateg ies
discussed or recommended in this report.

The Representatives may have interest in any of the securities, investments or financial instruments and may provide services or
products to any company and affiliates of such companies mentioned herein and may benefit from the information herein.

This document may not be reproduced, copied, distributed or republished in whole or in part in any form or for any purpose without
MIDF Investment’s prior written consent. This report is not directed or intended for distribution to or use by any person or entity where
such distribution or use would be contrary to any applicable law or regulation in any jurisdiction concerning the person or entity.

MIDF AMANAH INVESTMENT BANK: GUIDE TO RECOMMENDATIONS

STOCK RECOMMENDATIONS

BUY Total return is expected to be >10% over the next 12 months.

Stock price is expected to rise by >10% within 3-months after a Trading Buy rating has been assigned due to
TRADING BUY
positive newsflow.

NEUTRAL Total return is expected to be between -10% and +10% over the next 12 months.

SELL Total return is expected to be <-10% over the next 12 months.

Stock price is expected to fall by >10% within 3-months after a Trading Sell rating has been assigned due to
TRADING SELL
negative newsflow.

SECTOR RECOMMENDATIONS

POSITIVE The sector is expected to outperform the overall market over the next 12 months.

NEUTRAL The sector is to perform in line with the overall market over the next 12 months.

NEGATIVE The sector is expected to underperform the overall market over the next 12 months.

ESG RECOMMENDATIONS* - source Bursa Malaysia and FTSE Russell

☆☆☆☆ Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

☆☆☆ Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

☆☆ Top 51%- 75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

☆ Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology