Alliance Bank steady on robust loans, healthy NIM
It stated that the lender's key catalysts include robust loan growth and a healthy net interest margin or NIM.
In a report to clients, the research house said its target price of RM4.80 (ex-rights basis) was based on a return on equity (ROE) of 9.7% and a fair price-to-book value of one times to the lender's financial year ending March 31, 2026 (FY26).
The bank's other key catalysts include benign credit costs and a potential merger, CIMB Research said.
The research house said the bank's downside risks include higher-than-expected credit costs and higher cost of funds.
In the report, it also noted that Alliance Bank had announced its rights issue price fixed at RM3.33.
The entitlement basis is two rights shares for every 17 existing shares.
'These are in line with our expectations.
'The total funding raised from the rights issue of RM606.5mil is consistent with the earlier indicative amount of RM600mil.
'Overall, there were no major surprises in the latest rights issue announcement,' the research house said.
CIMB Research said the bank announced in March a renounceable rights issue to raise gross proceeds of RM600mil with a rights issue price of RM4.20 per rights share (reflecting a discount of approximately 20% to the then-market price of RM5.09), with an entitlement basis of three rights shares for every 32 shares.
The research house reiterated that the change was in line with its expectations and that the latest announcement did not come as a surprise, and was in line with its earlier estimate that the rights price may have to be adjusted down, owing to the drop in Alliance Bank's share price.
CIMB Research estimated that the rights price might have to be revised down to RM3.20 (from the earlier indicative RM4.20) if set at a 20% discount to the current share price, with the number of rights increased to 186 million from the earlier indicative 145.1 million.
This is based on an estimated revised entitlement of four rights shares for every 32 shares.
The research house pointed out that Alliance Bank's key targets for FY26 included an ROE of more than 10% post rights issue, loan growth of between 8% and 10%, net interest margin of between 2.40% and 2.45%, net credit cost of between 30 and 35 basis points, cost-to- income ratio of 48%, and a dividend payout ratio of 40% to 50%.
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