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Alliance Bank shares down 7.7% on weak Q1 earnings

27 Aug 2019 / 14:42 H.

PETALING JAYA: Alliance Bank Malaysia Bhd’s net profit for the first quarter (Q1) ended June 30, 2019 fell 43.8% to RM76.69 million from RM136.37 million a year ago, mainly due to expected credit losses stemming from the impairment of a few large accounts, and the continued investment in IT infrastructure to support the group’s transformation initiatives.

Due to the weak financial performance, its share price was trading 25 sen or 7.7% to RM3 at 3pm with 3.42 million shares changing hands.

Its revenue grew slightly by 1.5% to RM406.93 million versus RM401.07 million in the previous corresponding quarter, driven by net interest income growth of RM4.9 million or 2.0% from the loan expansion and the improved loan mix from better risk adjusted return loans.

Alliance Bank said for the quarter under review, it made a full provision and impairment amounting to RM74.9 million for a few large accounts.

The bank’s financial results were also affected by the Overnight Policy Rate (OPR) cut of 25 basis points (bps), resulting in a decline of RM8.2 million in net interest income. Its net interest margin stood at 2.4%.

“We remain vigilant in managing our credit portfolio, and prudent in our provisioning in view of the challenges enterprises face,” said group CEO Joel Kornreich (pix) in a statement.

Alliance Bank said the earnings erosion was mitigated by its stronger volume growth and enhanced loan mix from better risk adjusted return loans. Consequently, net interest income grew 3.6%.

“The bank will continue to pursue an efficient funding mix to mitigate the OPR cut impact, and guides FY2020 NIM to be between 2.40% and 2.45%.”

Its non-interest income came in at RM75.2 million amid the challenging external environment.

Alliance Bank said its gross loans and advances grew 6.0% to RM42.7 billion, outpacing the industry’s 4.2%. Gross impaired loans ratio rose to 1.30%, while loan loss coverage (including regulatory reserve) was at 128.2%.

In terms of capital position, its common equity tier-1 ratio, tier-1 ratio and total capital ratio stood at 13.5%, 14.2% and 18.7%, respectively.

Moving forward, the bank said it continues to focus on its FY2020 priorities to accelerate its core businesses in consumer and SME banking.

“We will also launch new digital propositions to enhance speed and simplicity in our service. We believe that doing so will help us accelerate our growth especially in the consumer and SME banking business.”

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