KUALA LUMPUR: CGS International Securities Malaysia has upgraded its call for Alliance Bank Malaysia Bhd as its results came in within the firm's expectations supported by robust loan growth.
CGS Malaysia gave Alliance Bank an "Add" call from "Hold" previously with a higher target price of RM4.30 from RM3.80 previously.
For the financial year ended March 31, 2024 (FY24), the bank's net profit was within CGS Malaysia's expectations, accounting for 97 per cent of its forecast and 98 per cent of Bloomberg consensus' estimate.
Alliance Bank recorded strong net profit growth of 36.5 per cent year-on-year (YoY) in the fourth quarter ended March 31, 2024 (Q4FY24).
The bank's full-year dividend per share (DPS) of 22 sen was higher than CGSMalaysia's projected 20 sen.
The firm said the key driver for the strong expansion of Alliance Bank's Q4FY24 net interest income was its robust loan growth of 13.6 per cent YoY. It was the strongest in the sector and more than double the six per cent YoY growth for the banking industry for the same period.
Most of its major loan segments grew by double-digit rates in FY24, including residential mortgages (up 10.4 per cent), non-residential mortgages (up 17.5 per cent) and working capital loans (up 12.4 per cent).
"We project strong loan growth of 8.0 per cent in FY25F, in line with the bank's targeted loan expansion of 8.0-10 per cent.
"We upgrade Alliance Bank from "Hold" to "Add" on the back of its robust loan growth in the sector, our projected strong earnings per share (EPS) growth of 13.7 per cent in FY25F, and its capital management initiatives that would lead to further increase in dividend payout ratio, in our view," it said.
CGS Malaysia maintained its FY25-FY26 EPS forecasts but raised its projected FY25-FY26 DPS forecasts by 16.3 per cent to 25-27 sen as it increased its assumed dividend payout ratio from 43 per cent to 50 per cent, in line with the level in FY24.
Downside risks to its call include a material deterioration in net interest margin and asset quality.