Lower earnings for Alliance Bank anticipated

KUCHING: Alliance Bank Malaysia Bhd’s ( Alliance Bank) first half of financial year 2018 (1HFY18) earnings came in within expectations as lower earnings had been anticipated by analysts.

In a filing on Bursa Malaysia, Alliance Bank reported that for the six months ended September 30, 2017, the group’s net profit after taxation was RM257.8 million.

Alliance Bank’s 1HFY18 earnings was within the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) and consensus’ expectations, with the net profit accounting for 49.9 per cent and 51.2 per cent of respective full year estimates.

MIDF Research, which had anticipated the group’s lower earnings in 1HFY18, noted that after the completion of the group’s corporate reorganisation, Alliance Bank’s focus will be on scaling up its two main products going forward, namely Alliance One Account and Alliance at Work.

“We have seen that the Alliance One Account are gaining further traction. We believe that this will be the main driver for its earnings in near to medium term,” the research arm said.

“Next is to drive the Alliance at Work. The Alliance at Work account is the bundling of product for all of the group’s business customers but we believe caters more to small and medium enterprises (SMEs), includes on-boarding of its employees and payroll solution.”

It added that this will provide a steady supply of current and savings accounts (CASA) for Alliance Bank and simultaneously give ability for the group to earn fee income for the service.

On to estimates, MIDF Research maintained Alliance Bank’s FY18 forecast but adjusted its FY19 book value downwards by three per cent to take into account the potential impact of MFRS 9.

MIDF Research believed that the group’s transformation program seem to be having the desired positive impact as evident by the strong income growth.

The research arm expected that the result of the transformation will be revenue accretive and will be a main driver for earnings.

“In addition, credit cost will normalise,” it said.

As such, MIDF Research maintained its ‘buy’ call but adjusted its target price to RM4.65 per share, from RM4.60 per share.