by NUR HANANI AZMAN/ pic by TMR FILE
ALLIANCE Bank Malaysia Bhd anticipates double-digit growth in its small and medium enterprises (SME) segment once the economy recovers from the Covid-19 pandemic, which will support its aspiration to be one of the top lenders in the SME space.
The SME banking segment continues to outpace industry growth with a three-year compounded annual growth rate that is four times faster than the sector, Alliance Bank group CEO Joel Kornreich (picture) said.
“SME banking is one of the main contributors to the group, with almost 35% of profit before tax coming from this segment in the financial year ended March 30, 2020 (FY20),” he told The Malaysian Reserve recently.
However, the bank anticipates “more modest” SME loan growth in the immediate term — understandably so, given the current uncertainties as the global economy grapples with the Covid-19 pandemic.
The country’s eighth-largest bank grew its SME loans by 8% to RM9.4 billion in FY20, while total loans expanded 2.2% to RM43.67 billion.
It’s targeting over 2% loan growth for FY21, to be driven by its core segments of SME and consumer banking.
For FY21, the lender will focus on providing customers with financial and non-financial assistance to help sustain them through the economic downturn wrought by the outbreak.
This also helps the bank manage its credit risk by providing appropriate temporary relief to the customers who have been most affected by the pandemic.
Further, the bank will ensure healthy liquidity ratios and strong customer-based funding, as well as high cash availability at all its branches and automated teller machines nationwide.
Its liquidity coverage and loan-to-fund ratios stood at 156.7% and 83.6% respectively as at end-March 2020.
The bank also plans to accelerate its remote banking and branch transformation efforts, as customer preferences shift towards fully digital banking solutions amid the pandemic.
It sees gross impaired loans (GIL) increasing from October onwards, once the national six-month loan moratorium that was introduced to help pandemic-affected individuals and businesses ends on Sept 30.
“We aim to extend repayment assistance to all our customers and have targeted packages especially for the bottom 40% income group and business clients in sectors severely impacted by the pandemic,” Kornreich added.
Alliance Bank’s GIL ratio stood at 2% as at end-March 2020, with total GIL amounting to RM871.34 million.
The bank is advising its customers to plan and discuss their financial situation with the lender as soon as possible, in order to determine the most suitable relief package for their situation.
“Broadly speaking, many of our customers have seen an improvement in business in the last three months, except for businesses in sectors that are highly dependent on tourism, for example hotels, tour operators and restaurants,” Kornreich said.
At a media briefing in June, Kornreich was reported as saying 18% of the bank’s eligible base of RM28.6 billion had opted out of the moratorium in favour of continuing debt payments with non-recurring extra interest.
He also said the moratorium would result in a Day One modification loss impact of nearly RM60 million, of which some RM35 million would be unwound through FY21. The bank expects the net effect in FY21 to be around RM25 million.
Alliance Bank has been providing assistance in the form of loan moratorium, loan restructuring and rescheduling as well as under Bank Negara Malaysia’s (BNM) Special Relief Fund (SRF).
Under the RM10 billion SRF, which was introduced to help SMEs struggling to stay afloat, Alliance Bank has approved RM627 million to its SME customers, equal to some 6.5% of its SME client base, Kornreich added.
In terms of non-financial assistance, the bank has also started a #SupportLokal initiative to help local businesses widen their customer reach by taking their businesses online.
It has also developed a business-to-business online platform, the BizSmart Solution portal, where business owners can gain access to relevant business solutions and resources for digitisation efforts.
The lender aspires to be the first bank in Malaysia to roll out an electronic Know-Your-Customer (e-KYC) solution that provides customers with fully digital account openings and credit card or personal loan applications, without having to visit a bank branch or be visited by a bank officer.
“We will introduce a fully digital customer account opening by leveraging e-KYC in line with BNM’s latest guidelines. We expect to launch this solution by the third quarter this year,” Kornreich said.