Results Note

01 June 2022

Alliance Bank Malaysia Bhd OUTPERFORM ↔

Price : RM3.60
FY22 Within Expectations Target Price : RM3.95 ↓
By Clement Chua l clement.chua@kenanga.com.my

FY22 net earnings of RM572.8m (+60%) came within expectations Share Price Performance
but a full-year dividend payment of 18.5 sen was a welcomed 4.00

surprise. With the current measures and further initiatives to be 3.80

taken, management opines that it is able to obtain more SME 3.60

3.40
accounts and enjoy better asset quality in FY23. NIMs could remain
3.20
afloat thanks to the OPR hike. Maintain OP but reduce our TP to 3.00
RM3.95 (from RM4.10) on book value updates. 2.80

2.60
FY22 in line with expectations. FY22 net profit of RM572.8m is within 2.40
expectations, making up 100%/101% of our/consensus estimates. An interim 2.20
dividend of 10.2 sen was declared, amounting to a full-year payment of 18.5
sen (50% payout, in line with pre-pandemic levels). This outpaced our
conservatively anticipated 40% payout / 15.0 sen payment. KLCI 1,570.10
YTD KLCI chg 0.2%
YoY, FY22 total income upped 3% to RM1.87b as NII gained 9% thanks to a
YTD stock price chg 25.9%
larger loans base (+5%) and better annualised NIMs (2.53%, +18 bps).
However, this was mitigated by NOII (-18%) coming off from poorer treasury
Stock Information
and investment gains but cushioned by better wealth management and forex-
related fees. CIR was stable at 44.1% as operating expenses rose in tandem Shariah Compliant No
with revenues. Meanwhile, provisions shed 59% as asset quality prospects Bloomberg Ticker ABMB MK Equity
were more encouraging, resulting in a much lower credit cost of 48bps (- Market Cap (RM m) 5,573.2
73bps). Even with the recognition of a one-off prosperity tax, FY22 earnings Shares Outstanding 1,548.1
came in at RM572.8m (+60%). 52-week range (H) 3.81
52-week range (L) 2.33
QoQ, 4QFY22 NII diminished by 8% due to some modification losses being 3-mth avg daily vol 2,366,736
booked during the quarter. Meanwhile, NOII inched by 2% on lower fee Free Float 58%
expenses (mainly card related). Owing to the lapse of URUS, management Beta 0.9
booked further provisions during the quarter out of prudency, driving credit
cost to 65bps (+51bps) and provisions (RM73.2m, +383%). This resulted in Major Shareholders
weaker sequential earnings of RM103.0m (-32%).
Vertical Theme Sdn Bhd 29.1%
Briefing highlights. Management has achieved its FY22 targets and believes Employees Provident Fund 11.4%
the group could do better in certain aspects in FY23. With regards to loans Global Success Network 4.8%
growth, gains were primarily seen in the SME space which outpaced
mortgages, contrary to most banks. While the group continues to bank on Summary Earnings Table
greater SME numbers in line with the nation’s economic recovery, so efforts FY Mar (RM m) 2022A 2023E 2024E
will be made to increase its consumer share. This led management to aim Net interest income 1,519 1,652 1,658
for 6-8% loans growth for FY23 (FY22: 4.6%). Meanwhile, NIMs are Non-interest income 349 254 304
expected to remain stable as OPR hikes are likely to recalibrate any Total income 1,868 1,906 1,962
pressures from deposits competition. With regards to asset quality, the Operating expenses -823 -833 -845
group is still keeping an eye on its rehabilitated accounts as 4% of its Loan impairment -217 -171 -107
TRA mix (Apr 22: RM6.3b / 14% of loans book) are still missing
Pre-tax profit 827 902 1,010
payments. That said, asset strains should be easier, indicated by their
PATAMI 573 676 757
credit cost guidance of 40-45bps (FY22: 48 bps). All in, this should uplift
Core PATAMI 573 676 757
the group’s earnings for the coming year and yield a 10% ROE.
Consensus NP 652 697
Post results, we raise our FY23E earnings by 1% from model updates. Earnings revision +0.7% New
Meanwhile, we also introduce our FY24E numbers which we anticipate could Core EPS (RM) 0.37 0.44 0.49
see a more moderate profit growth of 12% from normalising provisions. EPS growth 60% 18% 12%
NDPS (RM) 0.185 0.220 0.24
Maintain OUTPERFORM but with a lower TP of RM3.95 (from RM4.10).
Although we leave our earnings mostly unchanged, we updated to a lower BV/share (RM) 4.14 4.36 4.61
full-year book value in FY22 which led to a decline in our CY23E BVPS, leading NTA/share (RM) 3.87 4.08 4.33
to the lower TP. Our GGM-derived PBV of 0.87x (mean valuations) remain ROE (%) 9.0 10.3 10.9
unchanged. The group’s dividend-ROE stands at an attractive level PER (x) 9.7 8.2 7.4
between the smaller cap banks. This is aided by the group returning to P/BV (x) 0.87 0.83 0.78
pre-pandemic payouts (50%) which we believe could whet up better Net Div. Yield (%) 5.1 6.1 6.7
appetite among investors.

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Alliance Bank Malaysia Bhd Results Note
01 June 2022

Risks to our call include: (i) higher-than-expected margin squeeze, (ii) lower-than-expected loans growth, (iii) worse-than-expected
deterioration in asset quality, (iv) slowdown in capital market activities, (v) unfavourable currency fluctuations, and (vi) changes to OPR.

Results Highlights

4Q 3Q QoQ 4Q YoY 12M 12M YoY

FYE Mar (RM m) FY22 FY22 Chg FY21 Chg FY22 FY21 Chg
Net interest income 372 402 -7.5% 365 1.8% 1,519 1,395 8.9%
Non-interest income 80 79 1.9% 81 -0.9% 349 422 -17.5%
Total income 452 480 -6.0% 446 1.3% 1,868 1,818 2.8%
Operating expenses -219 -215 1.9% -232 -5.6% -823 -801 2.8%
Pre-impairment profit 232 265 -12.3% 214 8.8% 1,045 1,017 2.7%
(Allowances)/ write-backs -73 -15 383.2% -137 -46.4% -218 -533 -59.0%
(Allowances)/ write-backs on other
-1 0 128.0% 0 -585.3% -1 0 -283.4%
assets
Operating profit 159 250 -36.5% 77 105.6% 826 484 70.5%
Non-operating gains / (losses) 0 0 -35.7% 0 -50.0% 0 0 -40.7%
Profit before tax 159 250 -36.5% 77 105.6% 826 484 70.5%
Taxation -56 -99 -43.9% -27 105.1% -255 -125 103.3%
Minority interest 0 0 N.M 0 N.M. 0 0 N.M
Net PATAMI 103 151 -31.8% 50 105.8% 573 359 59.7%
Core PATAMI 103 151 -31.8% 50 105.8% 573 359 59.7%

Gross loans 46,189 44,515 3.8% 44,147 4.6% 46,189 44,147 4.6%
Gross impaired loans 853 899 -5.1% 1,032 -17.4% 853 1,032 -17.4%
Customer deposits 48,186 46,425 3.8% 48,489 -0.6% 48,186 48,489 -0.6%
Current and savings account (CASA) 23,577 23,235 1.5% 22,800 3.4% 23,577 22,800 3.4%
Total assets 61,848 59,450 4.0% 60,721 1.9% 61,848 60,721 1.9%
Shareholders’ equity 6,417 6,404 0.2% 6,258 2.5% 6,417 6,258 2.5%

Est. annualised NIM 2.51% 2.76% 2.49% 2.53% 2.35%

Cost-to-income ratio 48.5% 44.8% 52.1% 44.1% 44.1%
Annualised credit cost (bps) 64.6 13.7 125.0 48.5 121.3
Effective tax rate 35.1% 39.7% 35.2% 30.8% 25.8%
Annualised ROA 0.7% 1.0% 0.3% 0.9% 0.6%
Annualised ROE 6.4% 9.4% 3.2% 9.0% 5.9%
Gross impaired loans ratio 1.8% 2.0% 2.3% 1.8% 2.3%
Loan loss coverage ratio (LLC) 135.9% 121.7% 97.6% 135.9% 97.6%
LLC plus regulatory reserves 141.5% 127.0% 105.9% 141.5% 105.9%
Loan-to-deposit ratio 95.0% 95.1% 90.5% 95.0% 90.5%
CASA-to-deposit ratio 48.9% 50.0% 47.0% 48.9% 47.0%
CET-1 capital (Group level) 14.6% 15.3% 15.0% 14.6% 15.0%

Source: Company, Kenanga Research

Management Guidance

FY23 Targets FY22 Performance

Gross loans growth + 6-8% 4.6%
NIM ~2.50% 2.53%
Cost-to-income ratio <45% 44.1%
Net credit cost 40-45 bps 48 bps
ROE >10% 9%

Source: Company, Kenanga Research

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Alliance Bank Malaysia Bhd Results Note
01 June 2022

Peer Table Comparison

Core Earnings Net Div Yld
Name Revenue Growth PER (x) - Core Earnings PBV (x) ROE (%)
Last Price Market Cap Shariah Current Growth (%) Target Price
Rating
(RM) (RM'm) Compliant FYE 1-Yr. 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 1-Yr. (RM)
2-Yr. Fwd. Hist. Hist. 1-Yr. Fwd.
Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd.

Stocks Under Coverage

AFFIN BANK BHD 2.19 4,651.7 N 12/2022 12.6% 4.1% 9.4% 23.2% 8.8 8.0 6.5 0.5 0.5 5.7% 5.0% 2.40 OP
ALLIANCE BANK MALAYSIA BHD 3.60 5,573.2 N 03/2023 4.8% 4.5% 18.1% 12.0% 9.7 8.2 7.4 0.9 0.8 10.3% 6.1% 3.95 OP
AMMB HOLDINGS BHD 3.64 12,062.7 N 03/2023 6.4% 4.0% 5.7% 7.7% 8.0 7.6 7.0 0.7 0.7 9.2% 4.4% 4.35 OP
BIMB HOLDINGS BHD 2.92 6,293.4 Y 12/2022 -7.1% 0.6% -2.6% 14.8% 13.6 14.0 11.9 1.1 1.1 7.9% 3.6% 2.85 MP
CIMB GROUP HOLDINGS BHD 5.15 53,942.4 N 12/2022 4.4% 6.4% 1.3% 30.5% 11.1 11.0 8.4 0.9 0.8 7.8% 4.5% 5.70 OP
HONG LEONG BANK BHD 21.10 45,738.8 N 06/2022 4.0% 8.6% 5.8% 22.8% 15.1 14.3 11.6 1.5 1.4 10.0% 2.7% 22.85 OP
MALAYAN BANKING BHD 9.10 108,927.1 N 12/2022 4.3% 7.0% 4.9% 22.4% 13.1 12.4 10.2 1.2 1.2 9.8% 6.6% 11.05 OP
MALAYSIA BUILDING SOCIETY BHD 0.615 4,410.5 N 12/2022 67.0% 6.5% 16.7% 42.9% 10.1 8.6 6.0 0.5 0.5 5.8% 5.7% 0.520 UP
PUBLIC BANK BHD 4.73 91,812.6 N 12/2022 6.9% 6.5% -0.1% 25.4% 16.2 16.3 13.0 1.9 1.8 11.4% 3.3% 4.40 MP
RHB BANK BHD 6.08 25,188.9 N 12/2022 3.6% 3.7% -6.0% 15.7% 8.8 9.3 8.1 0.9 0.8 9.2% 5.3% 6.95 OP
Simple Average 10.7% 5.2% 5.3% 21.7% 11.4 11.0 9.0 1.0 1.0 8.7% 4.7%

Source: Kenanga Research

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Alliance Bank Malaysia Bhd Results Note
01 June 2022

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%

MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%

Sector Recommendations***

OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%

NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%

***Sector recommendations are defined based on market capitalisation weighted average expected total return for
stocks under our coverage.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any
representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment
objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of
addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability
whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities.
Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities
mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with
respect to these companies.

Published and printed by:

KENANGA INVESTMENT BANK BERHAD (15678-H)

Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia
Telephone: (603) 2172 0880 Website: www.kenanga.com.my E-mail: research@kenanga.com.my

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