RAM Ratings reaffirms Alliance Bank's A1/P1 ratings, with stable outlook

Published on 09 November 2011
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 RM1.5 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 mirrors the subordinated nature of the former to the Group’s senior unsecured obligations.

Alliance Bank is the smallest among the 8 domestic banking groups in Malaysia, with about 2% of the system’s outstanding loans and deposits. Nevertheless, it maintains a notable presence in consumer loans and lending to small and medium-sized enterprises, which together account for 76% of Alliance Bank’s loan book. The latter was one of the key drivers of its 4.8% loan growth in FYE 31 March 2011 (“FY Mar 2011”).

Notably, ongoing progress in its asset quality has aligned Alliance Bank’s gross impaired-loan ratio - 3.0% at end-June 2011 - with the industry average. Meanwhile, its credit-cost ratio is forecast to come in at a healthy 0.30% in FY Mar 2012, with full provisions made on its exposure to collateralised loan obligations. In the absence of such impairment losses, the Group recorded a healthier pre-tax profit of RM596.1 million in FY Mar 2011, and appears on track towards a better showing in fiscal 2012.

Alliance Bank’s strong deposit growth in FY Mar 2011, in contrast to its relatively modest loan expansion, had resulted in an improved loans-to-deposits ratio of 76.1% as at end-June 2011 (end-March 2010: 85.31%). However, this is expected to trend upwards as its lending momentum gathers pace. We note that the Group’s tier-1 risk-weighted capital-adequacy ratio remained healthy at 11.3% as at end-June 2011 (end-March 2010: 11.1%).

Media contact
Amy Lo
(603) 7628 1078
amy@ram.com.my