Alliance targets 10% profit growth in FY19
> Improved sales and reduction in recurring expenses in restructuring exercise will lift earnings, says CEO
KUALA LUMPUR: Alliance Bank Malaysia Bhd is targeting a net profit growth of 10% for the financial year ending March 31, 2019 (FY19), driven by its asset growth and the reduction of recurring expenses in its transformation initiatives.
Group CEO Joel Kornreich said half of the transformation expenses will not recur as the restructuring exercise resulted in a savings of RM20 million a year for the bank.
“The impact (of recurring transformation expenses) will be neutralised in FY19. This is why we believe that will (be able to) significantly lift our profit in FY19,” he told a press conference after its AGM yesterday.
In FY18, Alliance Bank’s net profit fell 3.7% to RM493.23 million from RM512.12 million a year ago, on higher expenses due to restructuring cost and strategic initiatives.
The bank had invested RM74.2 million in net restructuring costs, sales force expansion, and marketing & technology expenses as part of its transformation investments. Kornreich said its incremental revenue of RM103 million more than compensates for its transformation investment.
“We anticipate credit costs to stay stable and that will help,” he added.
Alliance Bank’s transformation initiatives centres around four key strategic priorities, which are SME banking expansion, Alliance One account (AOA), Alliance@Work and branch transformation. For FY19, it will scale up growth of SME banking expansion, AOA and Alliance@Work. The bank anticipates that these strategic business focuses will help to achieve its FY19 targets.
The AOA is a loan consolidation proposition that gives customers the control, convenience and flexibility over their monthly loan obligations. Alliance@Work is an employeeemployer proposition that offers payroll services to companies and banking services to its local and foreign employees.
Kornreich said the bank is also eyeing a revenue growth of 6% and loan growth of 10% in FY19. Its FY19 loan growth will be driven by AOA, SME and personal financing. In FY18, the bank’s loans grew 2.5%.
“The bulk of what we are planning to do is focused on consumers and SMEs. We still have a fighting chance although we recognised there are headwinds. We continue to invest in expanding capabilities and growing as fast as we can,” said Kornreich.
Chairman Tan Sri Ahmad Mohd Don said the banking industry will continue to be be competitive and that Alliance Bank has to work hard to show growth.
“Particularly more so for us, as a smaller entity. We don’t want to be squeezed out of the market,” he quipped.