RAM Ratings reaffirms Alliance Bankâ€™s A1/P1 ratings, with a stable outlook
RAM Ratings has reaffirmed Alliance Bank Malaysia Berhad’s (“Alliance Bank” or “the Group”) long- and short-term financial institution ratings at A1 and P1, respectively.
Concurrently, the A2 rating of the Group’s RM 1.5 billion Subordinated Medium-Term Notes Issuance Programme (2011/2026) (“Subordinated Notes”) has also been reaffirmed. Both long-term ratings have a stable outlook. The 1-notch difference between the rating of the Subordinated Notes and Alliance Bank’s long-term financial institution rating reflects the subordinated nature of the debt facility to the Group’s senior creditors.
Alliance Bank is the smallest domestic banking group in Malaysia. It holds about 2 per cent of the outstanding loans and deposits in the banking system, and has a notable presence in consumer banking and also among small and medium-sized enterprises. On the other hand, the Group’s Islamic and investment-banking franchises are viewed to be relatively weak. On the whole, the Group’s asset quality is perceived to be healthy. Its gross impaired-loan ratio had eased further to 2.3 per cent as at end-September 2012 (end-March 2011: 3.3 per cent) while its credit-cost ratio has been clocking in at a low 0.1 per cent for the past two fiscal years, thanks to commendable recoveries.
Alliance Bank benefits from a relatively large pool of low-cost current- and savings-account deposits, which are generally more stable; these made up 34.4 per cent of its deposit base as at end-September 2012, well ahead of the banking system’s 24.9 per cent average. With the momentum of loan growth picking up, its loans-to-deposits ratio had edged up to 81.2 per cent as at the same date (end-March 2011: 75.2 per cent) – a level still deemed sound. Underpinned by stronger investment and fee incomes, the Group delivered a better pre-tax profit of RM648.4 million in fiscal 2012 (fiscal 2011: RM559.8 million). For 1H fiscal 2013, Alliance Bank posted a pre-tax profit of RM358.0 million. Meanwhile, Alliance Bank’s capitalisation levels remained solid, with its tier-1 risk-weighted capital-adequacy ratio coming in at 12.1 per cent as at end-September 2012.