Alliance Bank On Right Track Scaling Up Operations

KUALA LUMPUR, March 24 (Bernama) -- Alliance Bank Malaysia Bhd (ABMB) is on the right track to scale up operations following its proposal to undertake a rights issue to raise RM600 million to boost its diminishing common equity tier-1 (CET-1) of 12.4 per cent by +1.1 percentage points (ppts), CIMB Securities Sdn Bhd.

CET-1 is a component of Tier 1 capital, comprising common stock held by a bank.

In its research note today, CIMB Securities noted that ABMB's refreshed strategy since the start of 2023 saw net earnings rise by about 30 per cent based on nine months financial year 2025's (9MFY25) annualised net earnings to RM737 million versus FY2022 net earnings of RM573 million.

Market share of loans rose to 2.7 per cent at end-December 2024 from 2.3 per cent in the same period in 2022.

"By continuing to secure a larger customer base via its robust growth acquisition strategy, this will enable it to tap into a larger customer pool," said CIMB Securities. 

All in, the investment bank said the rights issue were not excessively dilutive, but will enable the bank to sustain an above-industry average growth. The ex-rights price of RM5.01 is a marginal decline versus the RM5.09 current price.

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"Furthermore, with the rights issue in place, there is room for the company to raise its dividend payout.

"We maintain a “Buy” with a revised target price (TP) of RM5.70 from RM6.00 previously, assuming a rights issue price of RM4.20 on the basis of three rights shares for every 32 shares," it said. 

Key catalysts to its recommendation include benign credit costs, robust loan growth, and healthy net interest margin (NIM). 

Downside risks include escalating fixed deposit competition and worse-than-expected impact from inflation.

Meanwhile, Kenanga Investment Bank Bhd viewed the exercise as positive on higher earnings accretion potential.

It said the proposed rights issue was necessary to resolve ABMB’s reducing capital reserves.

"To fuel its expansion, balanced with retaining adequate capital, the trade-off is likely a lower dividend payout, which we revised to 40 per cent, the lower end of guidance range.”

Kenanga is maintaining a “Market perform” and with a TP of RM5.30.

Risks to its call include higher or lower-than-expected margin squeeze; higher or lower-than-expected loans growth; better or worse-than-expected deterioration in asset quality; slowdown in capital market activities; unfavourable currency fluctuations; and changes to overnight policy rate (OPR).

-- BERNAMA