KUALA LUMPUR: Alliance Bank Malaysia Bhd (Alliance Bank) is expected to have robust earnings growth and resilient asset quality, while its industry-leading current account and savings account (CASA) mix should allow it to reap maximum benefits from further interest rate hikes.

RHB Research said the bank's new four-year loans compound annual growth rate (CAGR) target of 8-10 per cent implies an above-industry pace. 

The firm said Alliance Bank also unveiled a cost-income ratio (CIR) target of 45 per cent in the financial year 2027 (FY27).

"The bank has advised analysts to expect intermediate spikes in the CIR from the additional investments and establishment costs required to realise its ACCELER8 2027 plans. 

"Elsewhere, we are encouraged by its commitment to a 50 per cent dividend payout ratio but deem its return on equity (ROE) target of 11 per cent to be slightly modest, given that it has already achieved 11.6 per cent in the first half of the financial year 2023 (1HFY23), and has a target of less than 10 per cent for FY23," it said. 

Alliance Bank unveiled its new ACCELER8 2027 strategy roadmap. Key highlights focused on expanding its niche beyond business and small and medium enterprises (SME) banking, on top of an 8-10 per cent four-year CAGR loan growth. 

RHB Research said the bank's new four-year roadmap would broaden its vision towards becoming "The Preferred Banking Partner", from a previous focus on SME and business clients. 

"Targeted segments within the consumer banking space include young professionals (high earners, not rich yet or HENRY) and high net-worth individuals. 

"Alliance Bank will also be looking to expand its geographical footprint in the northern states (e.g. Kedah and Pulau Pinang) and East Malaysia. 

"In terms of its competitive advantages, the bank highlighted speed, personalisation, and service excellence as key focus areas for the next four years," it said. 

RHB Research has made no changes to its earnings forecasts pending further clarity from management on the planned investments, but the firm acknowledges the implied downside risks to its FY24 and FY25. 

"Keep 'Buy' with a target price (TP) of RM4.40. We remain upbeat on the stock given its industry-leading CASA mix, robust earnings growth and stable asset quality.  

"Key risks to our call include weaker-than-expected loan growth, higher-than-expected impairment allowances, and weaker-than-expected noninterest income," it added.