Affin Hwang Reaffirms buy call on Alliance Bank

Affin Hwang Reaffirms buy call on Alliance Bank - Affin Hwang Capital Research has maintained its buy call on Alliance Bank Malaysia Bhd with a target price at RM4.80 based on a 1.3 times CY18E price-to-book multiple.

The research house said on Thursday the bank's strategy of boosting the higher risk-adjusted return (RAR) loans has worked well and is reflected in the higher net interest margins and the expansion in fund-based income despite flat loans growth as at December 2017.

"Overwhelmingly positive response to the Alliance One Account loan consolidation account (launched April17), with loan approvals of RM1.5bn year-to-date will be a boost to the higher RAR portfolio," it said.

Affin Hwang Research also noted Alliance Bank undertook a transformation exercise at the start of FY18E with initiatives targeting SME customers, migration of consumer loan accounts, streamlining and restructuring branches, beefing up the sales workforce and on technology/marketing. 

The bank has spent RM59.5mil in 9MFY18 out of a total cost of RM90mil.

The research house added that balance sheet adjustment for additional provisions on Day 1 starting April 1, 2018, should not be an issue given the bank's sound asset quality.

"Though FY18E is expected to see a dip in earnings, we believe that FY19E will be a year where there will be more earnings upside due to potentially higher revenues and the absence of the one-off transformation cost," it said.