Alliance Bank posts highest earnings in 13 quarters

PETALING JAYA: Alliance Bank Malaysia Bhd’s shares hit the highest level in more than three months after it announced its strongest net profit in 13 quarters, amid renewed market talk that Singapore’s largest bank may likely emerge as a major shareholder of the lender.

Bloomberg reported on Nov 24 that Singapore’s DBS Bank has resubmitted a “scaled-down” application to Bank Negara Malaysia to acquire up to a 30% stake in Alliance Bank, down from its previous submission to acquire up to 49%.

Currently, Alliance’s largest shareholder is Vertical Theme Sdn Bhd, which is backed by Singapore state investor Temasek Holdings Pte Ltd.

Temasek also holds about 28.3% of DBS.

CIMB Research said DBS’ entry as a new shareholder could be a game-changer for Alliance, potentially driving a re-rating of the stock if the bid succeeds.

It pointed out that a strategic shareholder of DBS’ scale and operational expertise could strengthen Alliance’s competitiveness, particularly in franchise depth, product innovation, digital transformation, and risk management practices.

“DBS’ potential entry would likely modestly intensify competition, particularly in small and medium enterprise (SME) banking, digital solutions and product innovation – areas where DBS has an edge and established capabilities.

“However, we believe Malaysian banks are well-positioned to compete, having invested significantly in digital transformation, automation, data analytics, and customer experience over the past decade, supported by substantial technology refresh cycles,” it said in a note to clients.

A day after Bloomberg’s report, Alliance Bank announced another quarter of earnings growth in the three months ended Sept 30, 2025 (2Q26), driven by loan growth and higher non-interest income.

In a bourse filing yesterday, Alliance Bank said its net profit rose 8.8% year-on-year (y-o-y) to RM206.56mil in 2Q26, as compared to RM189.91mil in the year-ago quarter.

This was the strongest net profit since the quarter ended June 30, 2022.

Meanwhile, the second-quarter revenue increased by 3.4% y-o-y to RM626.23mil against RM605.65mil in the previous comparative quarter.

Earnings per share for the quarter under review was 12.13 sen.

In line with the performance, the board of directors proposed a first interim dividend of 9.37 sen a share, with entitlement date on Dec 12, 2025, and payable on Dec 30, 2025.

Commenting on the bank’s results, group chief executive officer Kellee Kam said the first half of the year demonstrates the strength of the diversified business model and the disciplined execution of its strategy priorities.

“We achieved solid earnings growth, driven by robust loan expansion and higher fee-based income.

“These outcomes highlight the resilience of our franchise and reinforce our ability to deliver sustainable growth across key customer segments,” he said in a statement.

For the six months to Sept 30, 2025 (1H26), Alliance Bank registered a net profit of RM405.26mil against RM366.56mil in the previous corresponding quarter.

Six-month revenue was higher at RM1.24bil against RM1.15bil in the same period in 2024.

According to Alliance Bank, its net interest income in 1H26 rose 4% y-o-y to RM993.9mil, supported by higher loan volumes across several segments. Net interest margin (NIM) stayed within guidance at 2.37%.

Meanwhile, non-interest income expanded 30.7% y-o-y to RM247.6mil, due to strong foreign exchange sales and trade fees, higher banking service fees and increased treasury and investment income.

On its balance sheet, the bank registered a loan growth of 8.1% y-o-y due to a broad-based expansion across business segments.

Mortgage loans grew 11.2% y-o-y, SME loans increased 7.2%, commercial loans expanded 11.6%, while other consumer loans rose 7.4%, underpinned by strong demand in credit cards and share margin financing.

Customer deposits grew 12.5% y-o-y, comprising a 19.9% increase in fixed deposits and a 7.7% increase in current account savings account (Casa) deposits, for a Casa ratio of 39.1%.

The bank’s net credit cost stood at 23.2 basis points, while the gross impaired loans ratio improved to 1.91% versus 2.02% last year.

Alliance Bank also maintained strong capital and liquidity positions.

Its common equity tier-one or CET1 ratio strengthened to 13.6%, while its total capital ratio rose to 18.2%.

Liquidity also remained robust, with a liquidity coverage ratio of 160.2%, higher than the industry’s 151.5%. Its loan-to-fund ratio stood at 87.3%, also higher than the industry’s 82.6%.

On its prospects going forward, Alliance Bank said the evolving global landscape including geopolitical tensions and trade uncertainties continue to present risks to economic stability and market sentiment.

“For FY26, we remain vigilant and focused on enhancing our products, services, and technology; expanding lending with discipline; diversifying funding sources; and strengthening our risk management capabilities.

“These initiatives are aligned with our Acceler8 2027 strategy, reinforcing our commitment to sustainable growth and long-term value creation,” the bank said.

It added that the country’s sound fundamentals and diversified economic structure, coupled with renewed government focus to spur higher economic growth will help ensure Malaysia’s growth stays intact.

“Nevertheless, we are mindful that growth has been uneven and there are pockets of stress in selected sectors.”

The Alliance Bank stock rose by nine sen yesterday or 1.98% to RM4.63 a share, lifting its market capitalisation to RM8.01bil.

CIMB Research, which has a “hold” rating on Alliance Bank, kept its target price at RM4.70.

However, it told clients that Alliance offers room for valuation to converge towards one time of its price-to-book value (P/BV) from the estimated 0.88 times of FY26 P/BV.

At one time of P/BV, it would value the Alliance Bank stock at RM5.15 per share, aligning with other mid-cap banks such as Hong Leong Bank, AMMB Holdings Bhd and RHB Bank Bhd.

“That said, our current thesis is that much of Alliance Bank’s operating growth potential has already been priced in following its recapitalisation via the rights issue completed in July 2025.

“In the near term, there are downside risks given the potential for asset quality deterioration.”