Alliance sees single-digit loans growth in FY12

KUALA LUMPUR: Alliance Bank Malaysia Bhd, a wholly owned unit of Alliance Financial Group Bhd (AFG), is expecting single-digit loans growth for FY12 ending March 31, after an earlier year of slower loans growth caused by intense price wars in its mainstay mortgage loans segment.

Sng Seow Wah, Alliance Bank group CEO, told reporters yesterday the banking group has been aggressively regaining momentum in its mortgage loans business, having seen improvements in conditions in the first three months of this year.

An early indication, Sng said, was that Alliance Bank had seen approval rates for mortgage loans and wholesale banking recover to pre-crisis levels in the first three months of 2011.

However, Sng noted that approval rates still need to be translated into acceptances and subsequently into drawdowns.

“I’m confident that at the rate we are going, we will exceed last year’s rate of growth in the loans business. But a lot of it depends on what happens in the second half of the year,” Sng told a press conference after AFG’s AGM yesterday.

Sng conceded that the banking group could also record “very low double-digit” loans growth in FY12 if it “really pumps up and takes more risk”.

However, Sng was quick to add, “But a bank doesn’t make money from [its] loans book alone. You have to ask yourself, is that quality earnings?”
Sng (left) says AFG are not planning regional expansion. Also present at the AGM yesterday were AFG chairman Datuk Oh Chong Peng (centre) and Alliance Bank chairman Datuk Thomas Lee Mun Lung.

Sng said AFG is looking at striking a better balance between its business banking loans and consumer loans, of which mortgage loans comprised over 70% of its loans book.

AFG is also focusing on growing its non-interest income to contribute about 30% of its total revenue over the next three to five years from the current 20% level, Sng said.

AFG derives its non-interest income from commissions, service charges and fees from its wealth management, Treasury and transactional banking fees.

In a recent note, AmResearch said it had upgraded the loans growth assumptions on AFG to 9.6% for FY12F, 8.9% for FY13F and 8.3% for FY14F.

AmResearch said AFG is poised to resume loans growth in FY12 having posted a marginal growth of 4.8% in FY11.

Loans growth for AFG will be driven by most of its banking divisions including small and medium enterprises (SME), corporate and commercial banking loans and consumer loans, said the research house.

However, AmResearch projects that AFG’s non-income ratio will sustain at just over 20% for the next three years.

Replying to a question, Sng maintained that AFG is not planning regional expansion as the financial group still sees a lot of underserved segments in Malaysia, chiefly consumer banking, wealth management and business banking for SMEs.

AFG also has no plans to grow its branch network in Malaysia, Sng added. It currently has about 100 branches nationwide.