Alliance Bank’s 2QFY24 earnings were above expectations, but Maybank IB said it will maintain its full-year forecast, on assumptions of softer NOII in 2HFY24.
Management’s targets are largely maintained and our FY24E ROE of 9.1% lags management’s target of >10% (10.1% in 1HFY24). We maintain a BUY on ABMB with an unchanged TP of MYR4.10 on a CY24E PBV target of 0.8x. Above expectations Alliance Bank’s 2QFY24 net profit of MYR185m (+17% YoY, +23% QoQ) was above expectations (53% of full-year) but within consensus (50%). The variance against Maybank’s forecast was largely on account of better-than expected NOII growth.
Ther forecasts are maintained on softer NOII assumptions in 2HFY24. Positively, loan growth continues to be robust (+10% YoY), NIM improved QoQ and credit cost was lower YoY, thus mitigating the pick-up in operating expenses. Trending in line with targets The group is tracking in line with most of its FY24 targets and guidance is largely maintained: FY24E loan growth target of 8-10% (1HFY24: 10% YoY); NIM of 2.45-2.50% (1HFY24: 2.48%); CIR of <48% (1HFY24: 48%); net credit cost of 30-35bps (1HFY24: 29.6%); ROE >10% (1HFY24: 10.1%). CET1 ratio lower, but still comfortable.
The group’s strong loan growth of 10% YoY, coupled with MTM losses during the quarter, contributed to a decline in its CET1 ratio to 12.9% end-Sep 2023 from 13.7% end-June 2023. Guidance is that the ratio is stabilizing and management is engaged in capital optimization to stabilize the CET1. Interim DPS of 10.9sen in 1HFY24 is lower than the interim DPS of 12sen in 1HFY23 on account of the lower earnings in 1HFY24 vs 1HFY23 – a dividend payout ratio of 50% has been maintained.
