Alliance Bank rights issue to bolster customer acquisition efforts

The Star

5 days ago

PETALING JAYA: Analysts have maintained their outperform call with a lower target price of RM4.85 for Alliance Bank Malaysia Bhd (ABMB), following its recently completed rights issue exercise.
Kenanga told clients in a report it believes that the proceeds from the exercise would enable the group to ramp up its customer acquisition efforts.
It has cut its financial year financial year ending March 31, 2026 (FY26) earnings by 8%, reflecting lower net interest margins (NIMs) from the recent 25 basis overnight policy rate cut and aligned its credit cost assumptions to 35 basis points from 31, being the upper range of guidance.
Citing a recent meeting with the lender, Kenanga noted that the group presented a FY26 loans growth guidance of 8%-10% which is below the 12% achieved in FY25.
The research firm said its model assumptions are conservatively kept at around 8% in line with the lower band of guidance. The group's recently completed rights issue generated cash proceeds of RM600mil in capital to fuel its growth strategies.
"We gather that ABMB is likely deploying across all markets as opposed to accelerating its position in a specific market.
"Amid macro-economic challenges, we opine the bank may benefit from a larger collateralised portfolio (mortgage) as delinquency risks may emerge from its commercial segment, namely from small medium enterprises (SME) which are 34% of its loan book."
Kenanga noted that ABMB's FY25's reported NIMs of 2.45% could see further deterioration where asset yields could come off should the group's business loans be outpaced by its household loans.
Meanwhile, the recent 25 basis points cut would reflect a 2 basis points impact to ABMB's NIMs, per its sensitivity analysis.
However, thanks to some relief by the reduction in Statutory Reserve Requirement or SRR in addition to the abovementioned rights issue's capital injection, the group may likely ease on its deposits growth strategies, thereby lowering its funding cost, the research firm said.
Aside from the adjustments in overnight policy rate, which led to a 2% trimming to earnings, Kenanga has raised credit cost expectations to 35 basis points out of prudency amid higher asset quality concerns from the group's heavier SME comprised loans book.
It has also introduced its FY27 earnings which reflects a 13% earnings growth from credit cost normalisation and better cost management per the group's long-term strategies.
At last look, shares of ABMB were at RM4.50 a piece.