Alliance Bank expects 8% to 10% loan growth for FY24

KUALA LUMPUR: Alliance Bank Malaysia Bhd is targeting an eight to 10 per cent loan growth for the financial year ending March 31, 2024 (FY2024) against FY2023’s 6.2 per cent.

Group chief executive Kellee Kam said the growth will be driven largely from core segments which include small and medium enterprise (SME) and commercial business where it expects double-digit growth.

SME and consumer banking loans grew 13.1 per cent and 5.2 per cent, respectively, in FY2023 contributing to higher overall loans growth momentum at 6.2 per cent year-on-year (y-o-y).

“We believe the SME and commercial segments will continue to do well leveraging last year’s pick-up momentum. The SME segment is expected to have double-digit growth of 12 to 15 per cent and consumer business to have a high single-digit growth for FY2024,” Kam said in a virtual post-AGM media briefing today.

The bank also went through a de-risking exercise on its corporate book. Hence, it should also see corporate business returning to positive loan growth for the year with a total eight to 10 per cent for the full year, Kam said.

The group allocated about RM116 million in capital expenditure for FY2024, the bulk of which will be allocated to speed up digitalisation as well as information and technology transformation, Kam said.

To advance its growth target, he said the bank is further innovating its services and solutions to meet business needs throughout their life cycle.

“For example, Alliance Bank is targeting resilient ecosystems, such as renewable energy, helping SMEs adopt more sustainable business practices in their operations.

“The bank achieved RM180 million in renewable energy financing in FY2023 and targets to increase this by 70 per cent to over RM300 million in FY2024. It has set its sight to achieve a 10 per cent financing market share in the renewable energy sector by 2025,” he said.

To broaden its consumer business, Alliance Bank will continue to introduce innovative solutions tailored to evolving needs, he said.

“Catering to digitally-savvy customers’ preference for digital transactions, the bank introduced Asean’s first in-app dynamic card number feature in Alliance Bank’s Visa virtual credit card to make online transactions safer and more secure.

“Its credit card base has grown by 25 per cent to 152,000 since its April 2023 launch,” Kam said.

Expanding its footprint in rapidly growing economic corridors, he said the bank aims to surpass its loans growth of 10 to 12 per cent in Sarawak and Penang.

These states continue to attract large public and private investments and the bank plans to establish more branches from the current 79 to 83 by year-end as well as expand its sales force in these geographies, he said.

As for its Islamic banking business, Kam said it remains as its fastest growing segment with its unique value propositions such as the Halal in One programme, which assists SMEs in obtaining halal certification and financing and to gain wider market access.

“In FY2024, Alliance Bank aims to surpass the previous years’ Islamic financing growth of seven per cent.

“The bank is also working to increase synergies between its corporate and capital market businesses through an improved client coverage strategy, with the FY2024 goal of surpassing the seven to eight per cent revenue growth achieved in previous years,” he said.

On its net interest margin (NIM), Kam said it stood at 2.64 per cent for FY2023 and is expected to be compressed to 2.50 to 2.55 per cent in FY2024.

“Besides the rise in the overnight policy rate (OPR), there has also been a fair amount of deposit competition in the year. We do expect that to taper down but (it) will, nevertheless, persists for the full year.

“You will also see the switch from current account savings account (CASA) to fixed deposit,” he said.

As for its gross impaired loan (GIL) ratio, Kam noted that it stood at 2.5 per cent for FY2023, marginally higher than a year ago due to pressures from construction sector customers as well as a rise in delinquencies post-moratorium and further pressure from OPR hikes.

“However, it is still within our expectations. We do expect further pressures throughout the year but do not expect our GIL to be over the three per cent mark for the full year,” he said.

Moving forward, Kam added that Alliance Bank expects the Malaysian economy to moderate from the previous year, notwithstanding the accommodative environment for businesses and banks to grow its system loan growth to around the five per cent mark. – BK