RAM Ratings assigns stable ratings to Alliance IB

KUCHING: RAM Ratings has assigned A1/Stable/P1 ratings to Alliance Investment Bank Bhd (Alliance IB), the investment-banking and stockbroking subsidiary of Alliance Bank Malaysia Bhd (Alliance Bank).

It said the ratings are underpinned by Alliance IB’s role in the group’s universal-banking platform, as well as the support it receives from Alliance Bank.

“Alliance IB builds on the group’s existing network of customers for deal referrals and cross– selling opportunities.

“As one of the smallest investment banks in Malaysia, Alliance IB’s ability to leverage on Alliance Bank’s balance sheet accords it some flexibility to participate in capital-market deals that exceed its stand- alone capabilities.

“Although the Bank’s business pipeline recently regained some momentum, the subdued capital markets and significant competition will pose challenges to its business growth. The bank only accounts for about one per cent of the Malaysian stockbroking industry’s trades,” it said in a statement.

As at end- September 2016, it noted, Alliance IB’s common- equity tier-1 capital ratio came up to a high 84.9 per cent (101.7 per cent as at end-March 2016).

“Plans to utilise its excess capital include extending loans to corporate borrowers, which is anticipated to lend some earnings stability and bring the bank’s capitalisation to more optimal levels,” it said.

Meanwhile, the first half of the financial year 2017 (1HFY17), its loan book expanded to RM308 million ( RM204 million as at endMarch 2016), almost doubling on an annualised basis.

“With the accretion of loans and a healthier deal pipeline, Alliance IB’s pre-tax profit improved to RM16.2 million in 1HFY17 ( RM6.1 million in 1HFY16).

“That said, the bank’s returns on equity ( ROE) of 5.1 per cent in the same period remained low, due in part to its lofty capital base,” RAM Ratings said.