‘BUY’ CALL ON ALLIANCE BANK STAYS
Lender’s Q4 net interest margin expected to be broadly stable, says HLIB Research
ALLIANCE Bank Bhd is poised to post year-onyear earnings growth in the next quarter, backed mainly by better total income growth and lower loan loss provisions.
Hong Leong Investment Bank Bhd (HLIB Research) said Alliance Bank’s net interest margin (NIM) compressed four basis points (bps) sequentially in the third quarter ended Dec 31 last year due to the typical year-end competition for fixed deposits, which drove up funding costs.
“However, the fourth quarter NIM is seen to be broadly stable as seasonal fixed deposit contest eases and there is increasing focus to grow its higher yielding loan segments.
“Overall, management maintains its full-year NIM contraction guidance of 14 bps to 19 bps versus our forecast of -15 bps.”
It said although the 12.9 per cent loan growth might taper into the fourth quarter of financial year 2024, it could likely land at the upper end of the management’s year-on-year guidance of 8.0 to 10 per cent, topping the research firm’s conservative six per cent estimate.
“Separately, we think Alliance Bank is able to keep its sequential non-interest income steady, premised on good sustained foreign exchange sales and trade fees, together with healthy corporate banking fees.”
It said the better top-line outlook coupled with benign cost pressures should help blunt the impact and result in flattish sequential earnings.
That said, Alliance Bank has a high probability of posting yearon-year profit growth, backed by total income expansion and lower loan loss provisions.
HLIB Research has retained its “buy” call on the stock with a higher target price of RM4.10 from RM3.95 previously.