Alliance Financial Group’s Q1 net profit up marginally

PETALING JAYA: Alliance Financial Group Bhd's net profit for the first quarter ended June 30, 2017 rose marginally to RM135.00 million from RM132.47 million a year ago, due client-based fee income and net financing income.

In a filing with Bursa Malaysia, the group said its pre-provision operating profit improved by 7.9% year-on-year to RM210.2 million.

Revenue for the quarter rose 6.27% to RM386.61 million from RM363.81 million a year ago, due to higher net interest income inclusive of Islamic banking income, which grew 5.7%.

The higher Islamic banking income was due to expansion of total gross loans and investments portfolios. Net interest margin stood at 232bps.

During the quarter, other operating income improved by 8.1% mainly from higher brokerage fees, commission income and treasury income while operating expenses increased by 4.4% on higher personnel costs and administration expenses. Cost to income ratio stood at 45.6%.

Gross impaired loans ratio increased moderately to 1.1% while loan loss coverage stood at 122.1%. The current account/savings account (CASA) ratio improved to 35.3% from 34.8% a year ago. Loans-to-deposits ratio stood at 88.2% while loan-to-fund ratio stood at 84.3%.

The group's total capital ratio stood at 17.2%, with a Common Equity Tier 1 Capital ratio of 12.6% as at June 30, 2017.

The group's CEO Joel Kornreich said small and medium enterprises (SME) remained its best performing segment as it continued to focus on better risk adjusted returns and effective credit risk management measures.

Loans growth in the SME sector grew 9.7% year-on-year while gross impaired loans ratio stood at 1.4%. However, Kornreich noted that growth momentum has slowed due to the challenging environment.

"We continue to focus on growing customer based funding and optimise our deposit mix. The group recorded an improvement in core customer deposits, including CASA and fixed deposits, at an above-industry growth of 7.4% year-on-year. Liquidity remains healthy with liquidity coverage ratio at 143.7% and loan to fund ratio at 84.3% respectively. We saw a steady build-up in sales for our Alliance One Account value proposition," he said.

Moving forward, the group will continue to leverage on its franchise strength to deliver sustainable profits and continue to improve balance sheet efficiency by focusing on better risk adjusted return loans, liquidity management and by mitigating credit risk.

"This year, we have launched a number of new and differentiated value propositions and will continue to scale them up for our customers. As increasing number of our customers are moving to digital channels, we will be investing in the required technology enablers to support the bank's strategic initiatives. We will also focus on streamlining to improve the efficiency of our operations," said Kornreich.

The group's share price was down four sen to close at RM3.82 with some 327,400 shares done. It has a market capitalisation of RM5.8 billion.