Alliance Bank targets 7% loan growth for FY20

by DASHVEENJIT KAUR / pic by TMR FILE PIX

ALLIANCE Bank Malaysia Bhd is con dent on achieving double-digit growth in earnings for its financial year ending March 31, 2020 (FY20) after recording a 9% year-on-year (YoY) growth in its FY19 net profit.

Group CEO Joel Kornreich (picture) said the growth will be mainly supported by the bank’s small and medium enterprise (SME) business, as well as consumer segment.

“The optimism to see a higher growth in our net profit despite a somber industry outlook is mainly because we believe the worst is over and a rebound is on the horizon.

“The operating environment was not easy last year, however, the bank accelerated its growth,” he told reporters in a media briefing in Kuala Lumpur yesterday.

Net profit for the year hit RM537.6 million, or 34.7 sen earning per share, a 9% YoY increase, but not before fourth-quarter (4Q) earnings ended March 31, 2019, easing marginally YoY to RM111.8 million from RM112.9 million in 4Q18.

The bank’s business banking segment recorded a 15% YoY increase in operating profit to RM425.8 million.

Kornreich said the group recorded a strong financial performance as a result of the successful execution of its transformation initiatives to scale up its core businesses in the SME and consumer segments.

Alliance’s revenue for FY19 increased by 3.2% YoY to RM1.62 billion on higher net interest income (NII) due to stronger volume growth and improved loan mix from better risk adjusted return (RAR) loans.

Income grew by RM50.1 million or 3.2% to an all-time record high of RM1.62 billion for the financial year, driven by NII growth of 8.9% YoY, Kornreich said.

Net interest margin improved by 10 basis points YoY to 2.5%.

The bank also recorded a better loan growth for FY19 and eyes a higher rate for FY20.

“Gross loans and advances grew 6% YoY to RM42.7 billion outpacing the industry loan growth of 4.9% YoY.

“The group’s loan origination efforts continued to focus on better RAR loans from the SME, commercial, consumer unsecured lending and Alliance ONE Account segments,” Kornreich said.

He noted that headwinds in the commercial and corporate segment has daunted the bank’s effort to reach a loan growth target of 10%.

“However, we target a 7% loan growth for FY20,” he said.

For FY19, its SME and commercial loans expanded 12.9% YoY, while consumer unsecured loans grew 21.4%.

SME loan balances grew 11% YoY to RM8.7 billion, when compared to a 1.1% contraction in industry’s SME loans.

Its Alliance ONE Account loan balances tripled to RM3.2 billion from RM1 billion the previous year.

“The loan mix continued to improve with better RAR loans, making up 43% of the portfolio compared to 36% in the previous year,” Kornreich added.

Customer-based funding grew 5.3% YoY to RM45.9 billion driven by consumer deposits, while fixed deposits grew by RM1.5 billion YoY and help fund the growth in better RAR loans portfolio such as the Alliance ONE Account and personal financing.

The bank has proposed a second interim dividend of 8.2 sen which brings the total dividend for FY19 to 16.7 sen per share.