This article first appeared in The Edge Malaysia Weekly on June 1, 2026 - June 7, 2026

ALLIANCE Bank Malaysia Bhd’s (KL:ABMB) record FY2026 performance turns the spotlight on a question being asked by investors: Can the bank sustain its earnings momentum, or is much of the good news already reflected in its share price?

Posting a net profit of RM206 million for the fourth quarter ended March 31, 2026 (4QFY2026), up 4.3% from RM197.5 million last year, on a 5.3% increase in net income to RM593 million, the mid-sized lender delivered its strongest-ever quarterly earnings, which it attributed to resilient loan growth, healthy non-interest income and continued gains in market share.

Shares of Alliance Bank, which shot up to a record high of RM5.53 on Jan 14, closed at RM4.67 last Friday, 14.42% higher than a year ago.

The lender’s financial performance has helped drive a rerating of the stock over the past year, thanks to improved fundamentals and recurring market speculation about a potential acquisition by Singapore’s DBS Group Holdings Ltd. Rumours of the buying interest shown by Singapore’s biggest lender have swirled since early last year and DBS was said to be keen to advance the matter before Malaysia’s next general election, which was previously projected to be held in 2027.

Yet, with Bank Negara Malaysia maintaining the overnight policy rate (OPR) at 2.75%, analysts are at odds over how much higher Alliance Bank can push its growth trajectory.

Market experts with whom The Edge spoke are cautiously positive, articulating that the challenge lies not in Alliance Bank’s continued growth but rather in whether it can repeat the exceptional pace of earnings expansion seen in FY2026.

“While there could be questions on sustainability given higher inflation expectations, the group is delving into unrated bond issuance as an alternative, which it has guided to be an important component of its FY2027. I do not expect them to go beyond their niche as larger corporates may have their own preferred bankers among the larger cap peers as long as they balance quality and profitability,” says Kenanga Research senior analyst Clement Chua, noting that Alliance Bank’s growth may increasingly come from other businesses rather than pure loan expansion, which suggests that the bank’s performance may be sustained in the near to mid term.

High net worth and private investor Ian Yoong Kah Yin, who was formerly an investment banker, has taken an even more conservative stance given the “ambitious target of 10% loan growth and margins to remain under pressure as we expect another OPR cut by year end”.

Yoong’s view reflects a broader concern facing the banking sector. Lower interest rates typically compress net interest margins (NIMs) as lending yields fall faster than funding costs, limiting the ability of banks to convert loan growth into earnings growth.

Nevertheless, Alliance Bank appears to be outperforming many of its peers in terms of business momentum. While industry loan growth has remained in the mid single digits, Alliance Bank continues to gain market share in both commercial banking and consumer mortgage.

According to Yoong, the bank’s success is partly attributable to its grassroots approach to customer acquisition.

“Channel checks reveal that Alliance Bank goes to the ground in marketing to consumers by cold calling and engaging with existing and prospective customers,” Yoong says.

This approach, combined with the group’s long-standing focus on the small and medium enterprise segment, has enabled it to carve a niche for itself despite competing against much larger rivals such as Malayan Banking Bhd (KL:MAYBANK), Public Bank Bhd (KL:PBBANK) and Hong Leong Bank Bhd (KL:HLBANK).

Historically, Alliance Bank has traded at a valuation discount to larger domestic lenders owing to its smaller scale and lower profitability profile. Bloomberg data indicates that the stock still trades at about 0.82 times book value, below the multiples commanded by, for example, Public Bank (1.5f times), CIMB Group Holdings Bhd (KL:CIMB) (1.18 times), Maybank (1.42 times) and Hong ­Leong Bank (1.05 times).

“Alliance Bank trades at an earnings multiple of 9.5 times FY2026, price-to-book (P/B) ratio of 0.82 and return on equity (ROE) of 9.6%, according to Bloomberg [data]. Asset quality is decent with gross impaired loans (GIL) at 1.73%. The CET1 ratio of 13.2% is positive as it will benefit from Basel III reform. Alliance Bank ticks all the boxes as a well-managed bank,” says Yoong, predicting further upside of 6% to 10% for Alliance’s share price.

Similarly, Kenanga’s Chua believes the bank’s underlying fundamentals have improved enough to support current valuation levels.

To this end, several research houses have highlighted Alliance Bank’s improving ROE, stable asset quality and healthy capital position as reasons for maintaining positive recommendations on the stock.

RHB Research in a May 29 note says it expects Alliance Bank to deliver sustainable but moderate growth, modelling about 7% annual loan growth, NIM of 2.35% and ROE of 9% to 9.3% over FY2027 to FY2029. It maintained a “hold” call on the counter and lowered its target price (TP) to RM5.05 from RM5.45 earlier after revising its FY2027 P/B value target multiple to 0.94 times from 1.01 times, saying current valuations already reflect much of the bank’s near-term earnings prospects.

MBSB Research, which has a “buy” call on the stock, has also lowered its TP to RM5.92 from RM6.08 given “Alliance Bank’s history of asset quality shocks, but is managing itself much better this time”.

For investors, it would appear that future share price gains will hinge on management’s ability to execute consistently in its chosen niches or the emergence of a strategic suitor.

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