Hong Leong Investment Bank Bhd (HLIB) has maintained its HOLD call on Alliance Bank Malaysia Bhd (ABMB) with an unchanged target price of RM4.80, implying a potential capital upside of 7.4% and an expected total return of 11.6%. The research house said the bank’s earnings trajectory remains resilient for FY26 to FY28, supported by steady loan growth and easing credit costs.
HLIB said it remains confident in ABMB’s performance ahead of its upcoming 2QFY26 results, which are expected to show resilience on a sequential basis. This outlook is driven by robust loan growth and a decline in net credit cost (NCC) from the high base in the previous quarter, which stood at 59 basis points compared with its FY26 guidance of 30 to 35 basis points.
The research house noted that the bank’s loan book expansion target of 8% to 10% for FY26 remains intact, with momentum likely to pick up in the second half of the financial year as uncertainty from US tariff-related developments subsides. Both consumer and domestic SME segments continue to show healthy activity, while the bank maintains prudent oversight on its corporate exposures.
HLIB added that Alliance Bank’s ability to sustain strong asset yields despite stiff competition stems from its focus on tailored services and close client relationships. This strategic positioning allows the bank to maintain a steady balance between growth and risk management.
The report highlighted that net interest margin (NIM) may compress quarter-on-quarter in 2QFY26 following the Overnight Policy Rate (OPR) reduction in July, from 2.42% in 1QFY26. However, HLIB expects a positive turnaround from 3QFY26 onwards as fixed deposit repricing gradually adjusts downward. The bank’s FY26 NIM guidance of between 2.37% and 2.43% is expected to remain intact.
While treasury income may ease due to higher 10-year Malaysian Government Securities yields, which climbed to 3.7% from the previous quarter’s average of 3.6%, HLIB said this will likely be offset by improving NCC and lower provisioning requirements amid a more stable operating environment.
The research house made no changes to its FY26 to FY28 earnings forecasts and values ABMB at 0.95 times FY26 price-to-book, based on assumptions of 9.8% return on equity, 10.2% cost of equity, and 3% long-term growth. HLIB said the premium valuation compared with the sector’s average of 0.9 times is justified by ABMB’s superior ROE generation, which is one percentage point higher than peers over the past five years, and its consistent gain in market share.
However, HLIB added that the bank’s risk-reward profile remains balanced, citing stretched valuations and a modest dividend yield of 4%. Despite these factors, it said Alliance Bank’s earnings outlook remains solid and reflective of prudent management and focused execution across key segments.
As of 10.34 am, the stock price for Alliance Bank noted an increase of 0.67% to RM4.50.
