Alliance Bank shares up 1.82pct after Q1 net profit jumps 25pct

Alliance Bank Malaysia Bhd's share price saw a 1.82% increase in early trade on Thursday following a 25% rise in net profit for the first quarter ended June 30, 2026. The bank's share price opened at RM5.02 per share, with one million shares changing hands. Net profit for the quarter rose to RM248.32 million from RM198.70 million a year earlier, marking a strong 25% increase year-on-year. This growth was fueled by reduced provisions for credit losses and higher earnings, despite an uptick in operating costs.

Revenue for the quarter expanded by 2.5% to RM630.93 million from RM615.32 million in the previous year, with net interest income also growing by 2.5% year-on-year to RM511.7 million. This rise was driven by an increase in loans, advances, and financing, as well as investment securities. Hong Leong Bank Investment Bhd (HLIB) noted that the results exceeded both its expectations and the market's forecasts, with its estimate representing 28.8% and the street's 28.7% of the full-year outlook.

Consequently, HLIB remains optimistic about Alliance Bank's trajectory, projecting loan growth between 7.5-10% for the year, though the bank is intentionally steering towards more secure and business lending while cooling unsecured consumer loans. Analysts anticipate a slowdown in consumer loan growth to seven to nine%, while commercial and corporate loans should continue to grow at double-digit rates.

To maintain this growth, HLIB has lowered its FY27 net interest margin (NIM) guidance to 2.23-2.28% from the previous 2.28-2.35%. The bank's strategy involves a shift towards lower-risk secured and business lending while moderating unsecured consumer lending, fueled by intense competition for deposits. This restructuring aims to bolster shareholder returns as Alliance Bank moves closer to completing its ACCELER8 strategy.

Adjusting the FY26 annual figures with the positive surprise from Q1, HLIB increased its FY27 and FY28 earnings estimates by 4.3% and 0.9%, respectively. The firm also released FY29 projections, forecasting a 9.8% year-over-year earnings growth. Despite these optimistic outlooks, HLIB maintains its 'Buy' recommendation on Alliance Bank shares, with a target price of RM6.00.