ABMB: First Quarter Results Align with Forecasts, Loan Growth Mitigates Margin Pressure
| Investment Bank | PUBLIC INVESTMENT BANK |
|---|---|
| TP (Target Price) | RM4.50 (-0.2%) |
| Last Traded | RM4.51 |
| Recommendation | NEUTRAL |
Alliance Bank Malaysia Berhad (ABMB) reported a first-quarter (1QFY26) net profit of RM198.7 million, marking a 12.5% year-on-year increase. The results were in line with both Public Investment Bank’s and consensus estimates, representing 26% and 25% respectively of their full-year forecasts.
Performance Review
The bank’s robust financial performance was primarily driven by higher net interest income (NII), which benefited from strong loan growth across its consumer and SME portfolios. Non-interest income also saw a significant boost, surging 54.9% year-on-year to RM116.3 million, largely attributable to gains from treasury and investment activities amid favorable bond market valuations. ABMB’s loans grew at a strong 9.9% year-on-year, outperforming the industry’s 5.1% growth rate as of 2QCY25, leading to an increase in the bank’s loan market share to 2.29%.
Despite the positive top-line growth, the bank experienced a slight compression in its net interest margin (NIM), which slipped 1 basis point quarter-on-quarter to 2.42%. This was due to shifts in loan and deposit mix, alongside lower yields from personal financing. Management has revised its NIM guidance downwards to 2.36-2.43% from the previous 2.4-2.45%.
Total deposits expanded by 12.5% year-on-year, fueled by a 21.4% increase in fixed deposits (FDs) and a 2.8% rise in Current Account Savings Account (CASA) deposits. Although the CASA ratio declined to 38%, it remains one of the highest in the industry. The bank’s loan-to-deposit ratio stands at an elevated 96.5%, though additional liquidity from a recent rights issue is expected to support future loan growth.
Asset Quality and Outlook
Asset quality showed signs of slight caution, with the gross impaired loans (GIL) ratio ticking up by 13 basis points sequentially to 1.96%. Stress was observed within the consumer mortgage portfolio, and net credit cost increased year-on-year due to higher provisions mainly from the SME segment, which faced repayment difficulties. Despite this, the loan loss coverage ratio remained healthy at 113.3%.
Public Investment Bank has maintained its Neutral recommendation on ABMB, with a retained 12-month target price of RM4.50. The bank’s earnings forecasts for FY26-28F have been tweaked by an average of 1% due to bookkeeping adjustments. While the recent Overnight Policy Rate (OPR) cut is expected to lead to NIM contraction, the robust loans growth, particularly within the SME and consumer segments, along with a strong liquidity position, is anticipated to mitigate this impact.
