Alliance Bank cautious on FY26 growth outlook
KUALA LUMPUR: The revision of Malaysia's gross domestic product (GDP) growth for this year to between 4% and 4.8% by Bank Negara is considered decent, says Alliance Bank Malaysia Bhd .
On Monday, the central bank had lowered its GDP projection for this year from between 4.5% and 5.5% to between 4% and 4.8%, taking into account potential tariff impacts and other external risks.
'We believe that the 4% to 4.8% range is still a pretty decent number for the Malaysian economy,' said Alliance Bank group chief executive officer Kellee Kam during a press conference held in conjunction with the bank's AGM and EGM yesterday.
Despite the downward revision, Kam said the broader macroeconomic landscape continues to show resilience, supported by firm domestic demand, a low unemployment rate, healthy industrial production and stronger-than-expected tourist arrivals.
'These are positive indicators that provide some level of support to the economy. From an asset-quality standpoint, we believe the situation is still quite manageable this year,' he said.
On the overnight policy rate (OPR) cut earlier this month, Kam said it is expected to compress the bank's net interest margin (NIM) by about three basis points.
For its financial year ended March 31, 2025 (FY25), Alliance Bank recorded NIM of 2.45% and is maintaining its guidance at between 2.4% and 2.45% for its current financial year.
'Logically, when the OPR comes down, there may be an increase in business and lending. But this has to be balanced prudently with the changing macroeconomic landscape,' he said.
He added that while the OPR cut may offer some relief, the operating environment remains challenging due to rising business costs and continued uncertainty around tariff developments.
He noted that discussions around tariffs are still ongoing and outcomes may take time to materialise.
Looking ahead, the bank remains cautiously optimistic about its performance outlook for its financial year ending March 31, 2026 (FY26).
'Earlier this year, we were optimistic. But as events continue to unfold, we are now approaching the outlook with a bit more caution,' he said.
Alliance Bank is projecting loan growth of between 8% and 10% for its consumer segment in FY26, a moderation from the double-digit growth of 12% to 14% achieved over the past two years.
Kam said the bank expects to end the year closer to the lower end of that range.
'We are being slightly more careful this year, especially in view of the tariff discussions and the impact of the wider scope of the sales and service tax,' he said.
Despite the more guarded stance, he said Alliance Bank would continue supporting its core segments, which include small and medium enterprises, mid-market businesses, commercial clients and individual consumers.
On asset quality, the bank is maintaining its credit cost guidance at between 30 and 35 basis points, which he said is sufficient to absorb any potential volatility.
'For FY25, we closed at around 31.9 basis points and it was trending the right way. But because of the uncertainties on some of the discussions around tariffs, we will maintain that range of 30 to 35 basis points. That should provide a sufficient range to cater to any potential unforeseen issues,' he added.
In FY25, Alliance Bank posted a higher net profit of RM750.73mil or basic earnings per share of 48.49 sen, as well as a revenue of RM2.27bil.
This was up from a net profit and revenue of RM690.48mil and RM2.02bil recorded respectively in the previous year.
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