HLIB Expects Alliance Bank's NIM To Be Stable Heading Into 2Q FY2025

KUALA LUMPUR, Aug 30 (Bernama) -- Alliance Bank Malaysia Bhd's net interest margin (NIM) is expected to be stable heading into the second quarter of financial year 2025 (2Q FY2025), said Hong Leong Investment Bank Bhd (HLIB).

In the research note, the investment bank said the outlook is supported by benign fixed deposit (FD) competition, the move to lower its promotional FD rates in August 2024, and further cost of funds optimisation initiatives. 

That said, the bank’s loans growth is seen to taper, given its selective lending strategy to preserve margins. 

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"Separately, we are not overly concerned about any potential asset quality deterioration as we believe Alliance Bank is better equipped versus prior slumps. Its loan loss coverage is now at 97 per cent versus the pre-pandemic level of 70-80 per cent," it said. 

In 1Q FY2025 ended June 30, 2024, Alliance Bank's net profit rose 17 per cent year-on-year (y-o-y), underpinned by its strong top-line growth, stable NIM, robust loans and non-interest income growth.

As such, HLIB keeps its ‘buy’ call on Alliance Bank’s shares, raising the target price (TP) to RM5.10 from RM4.10 previously. 

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Meanwhile, in a separate note, Public Investment Bank Bhd (PIVB) also maintained its ‘buy’ rating on the counter, with a higher dividend-based TP of RM4.90.

"We continue to favour Alliance Bank given its encouraging loans growth momentum that surpassed industry growth. 

"Additionally, we also deem Alliance Bank’s current valuation as attractive," PIVB said. 

-- BERNAMA