KUALA LUMPUR (April 9): Alliance Bank Malaysia Bhd (KL:ABMB) is on course to meet its loan growth target of 8% to 10% for the current financial year on the back of aggressive customer acquisition, according to Hong Leong Investment Bank (HLIB).
The momentum "is driven by the retail mortgage segment that will enable cross-selling and the small and medium enterprise [segment] expansion adding roughly 700 new clients monthly", HLIB said in a note on Wednesday.
However, global supply disruptions may pressure the SME segment, it said. Alliance Bank's gross impaired loan ratio stood at 1.89%, it added.
Meanwhile, Alliance Bank's tactical “pre-funding” strategy also helps defend its net interest margin (NIM) against rising competition, HLIB said.
While the NIM is expected to compress by about three to six basis points from its previous guidance of 2.37-2.43% — owing to higher funding costs and a shifting loan mix — the bank’s tactical decision to "pre-fund" deposits earlier in the year allowed it to defend margins against year-end competition,the research house said.
Meanwhile, the upcoming Basel III implementation in July 2026 is projected to provide an uplift of 15 to 20 basis points to the common equity Tier 1 ratio, which measures a bank's core equity capital against its risk weighted assets, HLIB said.
There are now four ‘buy’ and 13 ‘hold’ calls on the stock. The consensus target price is RM5.43, based on the average of the 17 research houses tracked by Bloomberg.
HLIB maintained its ‘buy’ call on the counter and its target price at RM5.70, implying a 25% capital upside. As of Thursday's noon break, the stock was trading at RM4.65, giving the group a market capitalisation of RM7.89 billion.