Alliance Bank expects steady loan growth in near term

This is despite the rising inflation and interest rates that may affect the customers’ loan repayment ability


ALLIANCE Bank Malaysia Bhd is expecting loan growth in the local banking sector to remain steady in the near term, despite the higher interest rates and rising inflation.

Group CEO Joel Kornreich said the bank recognises that rising inflation and interest rates may affect the ability to repay loans at some point, but the bank does not see much of a change for now.

He added that the industry’s loan growth has been about 5% this year. 

“Right now, we are not seeing a slowdown in demand, so I do not think that there is a real reason to believe that it is going to change significantly.

“In the past two or three years, including now, we have lived through elements of volatility, which include inflation and geopolitical tensions. 

“Therefore, the best that we can do is to be reasonable and prudent in what we do to acquire loans and to compete as effectively as we can,” he said at a virtual press conference after the bank’s 40th AGM today.

Kornreich explained that last year, the bank proactively reached out to all its customers to better understand their financial situation and helped them with a loan modification application or an extension before it expired.

He said loans under the Perlindungan Rakyat dan Pemulihan Ekonomi (Pemulih) programme have reduced to RM6.55 billion, or 14.2% of the bank’s loan book, as many customers have graduated and resumed repayment.

He noted that furthermore, 99% of its customers who have graduated from the Pemulih programme have resumed full or partial financing repayment.

Meanwhile, Kornreich said Alliance Bank is set to double its small and medium enterprise (SME) loan in the next five years. 

He highlighted that over the last five years, the bank successfully grew its SME loan market share from 3.4% to 5%.

He said in tandem, the bank will scale up its consumer banking business by serving business owners’ personal banking needs, growing wealth management and using digital channels to scale up customer acquisition.

“During the financial year 2022 (FY22), Alliance Bank acquired 56,000 new-to-bank customers, an increase of 50% over the previous year.

“This financial year, we plan to increase customer acquisition by 40% year-on-year and double our acquisition of business owners with personal and business relationships to 10,000,” he noted.

Additionally, to acquire more customers, Kornreich said the bank will launch more product and service innovations, expand its sales teams and digital channels, and broaden its reach via strategic partnerships. 

He noted that for the SME segment, the bank will equip its SME sales force with new digital tools, such as the ability to provide its clients with quick approval-in-principle for their loan applications. 

He added that the bank also aims to triple its Digital SME loans from RM60 million to RM200 million this year and expand its offerings to include remote business account opening.

On wealth management, he said the bank will innovate its digital capabilities to provide customers with a 360-degree portfolio review and include portfolio simulation capabilities to help improve the relationship managers’ interactions.

“We will focus on strengthening our IT capabilities, including modernising our core architecture and strengthening our data analytics to create a better customer experience. 

“We will invest approximately RM50 million each year on digital transformation in the next five years,” he said.

According to Kornreich, in FY22, digital personal loans accounted for almost 33% of total personal loan booking and the bank aims to grow its contribution to more than 40% this year. 

He noted that the bank will also further automate its loan processes internally to improve turnaround time.

To improve efficiency, Kornreich said Alliance Bank will progressively roll out its new branch model, adding that the bank’s goal is to achieve zero back office in its branches, supported by enablers such as virtual service counters, and greater automation and centralisation.

Meanwhile, he added that the bank will continue to pursue its sustainability agenda of helping individuals and businesses adopt sustainable lifestyles and practices while reducing its own greenhouse gas emissions. 

“In FY22, Alliance Bank achieved over RM2 billion in new sustainable banking business.

“We have expanded our target of new sustainable banking business to RM10 billion by FY25, from RM5 billion previously,” he said.

He also noted that the bank is now collaborating with Bursa Malaysia Bhd, the Malaysian Green Technology and Climate Change Corp and the United Nations Global Compact Malaysia and Brunei to help businesses structure their environmental, social and governance roadmap to implement sustainable business practices.

At noon break, Alliance Bank’s shares traded unchanged at RM3.45, giving it a market capitalisation of RM5.34 billion.