Higher credit cost hits AFG third quarter earnings

PETALING JAYA: Alliance Financial Group Bhd (AFG) posted a lower net profit of RM129.68mil in the third quarter of financial year 2017 (Q3’17) ended Dec 31, 2016, primarily attributed to higher credit cost due to larger impairment provisions.

In a filing to the Bursa Malaysia, AFG announced that its net profit for the quarter narrowed by 4.4% in contrast to RM135.60mil in the same quarter of the previous financial year. This was despite a moderate 4.8% increase in revenue year-on-year (y-o-y) to RM378.64mil in Q3’17.

AFG’s business banking segment contributed 44.6% of its total revenue, followed by the consumer banking segment which contributed about 37.7%.

Its chief executive officer Joel Kornreich highlighted that AFG managed to deliver a sustainable financial performance, amid the challenging market environment.

“Our results came from growing our best performing segments with better risk adjusted returns, implementing effective credit risk management measures and optimising our deposit mix,” he said in a statement.

As for the first nine months of financial year 2017, the smallest lender in Malaysia reported a marginally higher revenue, which grew by 2.9% y-o-y to RM1.10bil. Its net profit also rose, albeit narrowly, by 0.65% y-o-y to RM394.74mil.

AFG’s better risk-adjusted-returns loans within the consumer, small and medium enterprises (SME) and commercial lending segments grew faster than the other segments, at the annualised rate of 14.6%. The SME loans growth remained strong at 12.3% y-o-y.

The entity’s gross impaired loans ratio stood at 1%, notably better than the industry average of 1.6%. Its customer deposits also grew commendably by 4.2% y-o-y, starkly in contrast to industry average of 1.4%.

Loan-to-deposit and loan-to-fund were at 86.6% and 83.4% respectively.

For the quarter in review, no dividend has been proposed by AFG.

With regard to its capital position, AFG recorded a total capital ratio of 16.6%, which was among the strongest in the industry. The financial group also maintained a Common Equity Tier 1 ratio at 12%.

Moving forward, AFG projected for profitability for the financial year of 2017 to remain broadly consistent with the previous financial years.

It also plans to roll out more new and innovative solutions to meet the needs of its customers. ratios