Overview

Alliance Bank Malaysia Berhad (ABMB) was listed on the Official List of the Main Market of Bursa Malaysia Securities Berhad on 26 September 2017. Today, Alliance Bank and its subsidiary Alliance Islamic Bank Berhad are an integrated financial services group offering banking and financial solutions through its consumer banking, SME banking, corporate and commercial banking, and Islamic banking businesses. ABMB is one of Malaysia's smallest listed banking group by assets, with an asset size in excess of RM76.9bn as of 31 March 2024.

Investment Themes

• New CEO on board. Mr Kellee Kam was appointed ABMB’s group CEO on September 1, 2022. With over 13 years of experience at the RHB Banking Group, including a tenure as Group Managing Director from 2011 to 2015, we believe he brings a wealth of expertise in corporate banking to his new role. We hope to see him leverage his strategic insights and industry knowledge to drive growth and innovation in ABMB’s corporate banking segment.

• Robust growth momentum. ABMB's business momentum continued to demonstrate robust growth in various segments, such as the 12.9% YoY increase in loans, which exceeds management's guidance of 8-10% due to rising business loans. There is a concerted effort to build up non-NII, with noticeable improvements in treasury and trade activities. Treasury assets witnessed substantial growth, increasing by 18.0% YoY in recent FY24 results.

• Healthy key financial metrics. Other key financial metrics are coming in well within targets, with the goal of driving quality over quantity. NIM is at 2.48%, which is in line with guidance. ROE stood at 10.1%. Balance sheet indicators, such as overall gross impaired loans, have also shown sequential improvement with credit costs within the expected range.

• ACCELER8 2027 Strategy is on track. Management noted that the implementation of the ACCELER8 2027 Strategy is on track, with positive early indicators. New-to-bank customer acquisition has also been impressive. According to management, NTB customers averaged 1,000 SMEs and nearly 10,000 consumers per month.

Risk

• Smaller banks like Alliance could potentially be affected by the emergence of digital banks as competition for CASA and loans could intensify, thus leading to NIM erosion.

Recommendation

• We value ABMB at RM4.30. Our valuation is based on an implied PBV of c. 0.93x based on the Gordon Growth Model.

Source: TA Research - 2 Jul 2024