MAYBANK Investment Bank Bhd remains wary of Alliance Bank’s asset quality issues surfaced in the calendar year 2019 that could possibly be compounded by the Movement Control Order (MCO).
It said absolute impaired loans have jumped 70% since March 2020 and Alliance Bank GIL ratio has risen to 1.86% at end December 2019 from 1.12% at-end March 2019.
The two main sources of impaired loans have been the bank’s historical mortgage portfolio, which has seen the GIL ratio increased to three per cent at end 2019 from 2.1% end March 2019, while Alliance One Account has seen the GIL ratio doubled to 5.3% at end 2019 from 2.7% at end-March 2019.
“With the rise in unemployment ahead, we are concerned that asset quality will further deteriorate when the MCO ends,” Maybank IB said in a note today.
Meanwhile, the small and medium enterprises (SME) loans make up 27% of Alliance Bank’s total loans as opposed to a peer average of 15%.
Loans to this segment expanded 10.6% year-on-year end 2019 and as at end December 2019, Alliance Bank’s working capital GIL ratio (which would include corporate borrowings as well) has been stable at 1.1%.
“Asset quality issues in this segment will nevertheless have to be monitored, in light of the MCO effect on domestic consumption, which most SME businesses are geared,” it said.
Maybank IB has maintained a “Hold” call with a lower target price of RM1.95. – April 20, 2020, Bernama
