3QFY22 significantly above expectations
BUY maintained
Alliance Bank’s (ABMB) 3QFY22 results were significantly above expectations due to better-than-expected NIM expansion and lower credit cost. We upgrade FY22-24 earnings by 13-19% on higher NIM and lower
credit cost assumptions, but maintain elevated credit costs still, into FY24, on prudent grounds. We maintain a BUY on ABMB with a higher TP of MYR4.00 (+75sen), supported by a CY23E ROE of 9.4%.
Significantly above expectations
ABMB’s core net profit of MYR151m in 3QFY22 (+50% YoY, +13% QoQ) took 9MFY22 core net profit to MYR489m (+58% YoY). This was significantly above expectations at 100% of our and consensus’ full-year forecasts, the major variance being much better NIMs and much lower-than-expected provisions in 3QFY22.
Guidance for full year
Management guides for NIM of above 2.5% for FY22, against 2.54% in 9MFY22 and has further lowered its credit cost guidance to <55bps from <75bps previously. It also targets an ROE of >8%, taking into account the impact of Cukai Makmur.
Upgrading earnings by 13-19%
Factoring in lower credit cost and higher NIM, we raise FY22 earnings by 19%. Our FY22E ROE of 8.9% would correspond to management’s guidance of >8%. We raise FY23/24E earnings by 19% and 13% respectively, also on lower credit cost, but we keep the credit cost elevated on grounds of prudence, at 45bps respectively, against 55bps in FY22E