KUALA LUMPUR (July 17): Alliance Bank Malaysia Bhd (KL:ABMB) appears on track to meet its financial targets and investors should continue to accumulate the stock supported by decent dividend yield, said Maybank Investment Bank.

Loan growth remains robust at an average of about 8% for the financial year ending March 2025 (FY2025) driven by lending to small-and-medium enterprises and personal financing, Maybank IB said in a note. Mortgages are also expanding but at a slower pace due to price competition, the house flagged.

“Loan growth momentum continues to be encouraging, and is currently tracking management’s target of 8%-10%," Maybank IB said and kept the stock on ‘buy’ call with above-consensus target price of RM4.35.

Shares of Alliance Bank, controlled by Singapore’s Temasek Holdings, have climbed 15% so far this year amid a rally in the banking sector. The consensus is broadly bullish on the stock with 12 out of 14 research houses recommending ‘buy’ and the remaining two having ‘hold’ calls, according to Bloomberg.

The consensus 12-month target price is RM4.28, implying potential gain of 9.5% from the current price. The stock is currently trading at RM3.91 on Bursa Malaysia.

All in, analysts estimate Alliance Bank to make RM749.67 million net profit for FY2025 versus RM690.46 million in FY2024. The company is due to report its first quarter results for FY2025 on August 29.

Alliance Bank is also guiding for net interest margin — a measure of lending profitability after deducting interests paid to depositors — to come in at 2.4%-2.45% for FY2025. The company is also looking at cost-to-income ratio of about 48% and up to 35 basis points in credit costs.

The lender is also eyeing return-on-equity of above 10%, and the ability to sustain it could “contribute to further upwards rerating of the bank,” Maybank IB said.

Further, Alliance Bank’s common equity tier 1 capital ratio — a measure of a bank’s capital strength based on the highest quality of regulatory capital — is comfortable and with an expected dividend payout of 50%, yields are “decent” at about 6%, the house added.