KUALA LUMPUR: Alliance Bank Malaysia Bhd will likely see an improvement in its financial health, specifically in its CET1 capital ratio, due to changes in international banking rules Basel III, said CIMB Securities Sdn Bhd.
At the same time, the bank is seeing strong growth from new small businesses (SMEs) and individual customers, which will help boost its performance further.
The firm noted that the estimated net impact from Basel III changes will likely be an increase of 20-30 basis points (bps) to its CET1 ratio, arising from changes to operational risk-weighted assets and credit risk-weighted assets.
It said that Alliance Bank’s current group CET1 ratio of 12.4 per cent as of end-Dec 2024 is based on a group CET1 level of RM6.6 billion and a total risk-weighted asset (RWA) of RM53 billion.
“As for the credit risk-weighted portion, the changes are split into the SME or business loans portfolio, individual (household) segment portfolio and corporate loans portfolio.
“For Alliance Bank, business loan portfolio changes from Basel III are likely to be positive as the company will be allowed to use commercial real estate as collateral for SME loans,” the firm added.
CIMB Securities said that Basel III introduces more refined buckets for the individual (household) segment, essentially splitting the segment into five more granular classifications compared with three in the past.
The firm expects overall loan growth to slow down from the robust annualised rates of 12.5 per cent in the third quarter of financial year 2025 (Q3FY24) and 12 per cent in Q2FY25, as the financial year ending in March is usually quieter due to several seasonal holidays.
“The company is likely to taper down its loan growth to its targeted 8–10 per cent level for the next
financial year (FY26), partly owing to the higher base effect. Growth is expected to continue to be driven by the residential mortgage, non-residential mortgage and SME segments,” he added.
In terms of deposit growth, the bank will continue to target adding about 1,000 new SME customers a month, or 12,000 new SME customers per year, although this number is likely to drop back to about 8,000 new SME customers per month in the upcoming FY26 as its growth matures.
The bank’s CASA deposit threshold is 35–36 per cent of total deposits. It aims to add 100,000 retail individual customers per year through its loan channel, with plans to eventually convert some of these into wealth management customers.
Meanwhile, Alliance Bank’s net interest margin for FY26 is likely to be stable, similar to this year’s (FY25) targeted 2.40–2.45 per cent level.
CIMB Securities kept its “buy” call for the bank with an unchanged target price of RM6 a share.
-TheStar