KUALA LUMPUR (July 29): Alliance Bank Malaysia Bhd (KL:ABMB) expects its asset quality to remain stable, saying current economic conditions show no signs of added stress.
In tandem, the lender expects credit costs to improve in the current fiscal year, as it moves beyond its pre-emptive provisions in the financial year ended March 31, 2026 (FY2026).
The Malaysian economy is well-positioned to buffer the impact of the conflict in West Asia, with broad-based gross domestic product growth and pre-emptive measures to support industry liquidity, said group chief executive officer Kellee Kam at a post-AGM media briefing on Wednesday.
WATCH: Indicators show no signs of further economic stress — Alliance Bank CEO
“No banker will ever say the worst is over; all I can say is that current indicators don’t indicate further stress,” Kam noted.
Net credit costs are projected to improve to between 27 and 32 basis points (bps) for FY2027, from 33.5bps in FY2026. It had booked a pre-emptive provision of RM185 million in FY2026.
Asset quality improved year-on-year in FY2026. Gross impaired loans stood at 1.73% at end-March 2026, as compared to 1.83% a year earlier.
The US-Iran conflict, which began in late February, created economic uncertainty as higher energy and logistics costs pressured businesses.
Tensions eased temporarily after peace talks started in June, but fighting resumed after the talks collapsed. Brent crude oil rose 3.88% to US$87.35 per barrel at the time of writing.
Malaysia has remained resilient so far, Kam said, crediting early support from the central bank and banking sector to help small and medium enterprises, and mid-sized businesses before any "real stress occurred".
“All the banks, we’ve worked as an industry, to make sure we are there to support our customers. We always say before something becomes a credit issue, it becomes a liquidity issue first,” Kam said.
“If we address the liquidity, a credit issue generally will be more workable,” he added.
Meanwhile, Kam noted the bank targets return-on-equity to stand between 10% and 10.5% in FY2027, versus the 10.2% achieved in FY2026.
Dividend payout ratio stood at 40% in FY2026. It projects a 40% to 50% dividend payout for FY2027.
At the time of writing, shares in Alliance Bank were one sen or 0.21% lower at RM4.79, valuing the group at RM8.29 billion.