Alliance Bank Malaysia reported robust growth prospects, driven by strong year-to-date (YTD) loan growth, as noted by RHB Investment Bank (RHB). The bank's management highlighted its competitive loan market and geographical expansion plans, aiming to gain market share in key regions such as the northern region, Johor, and Sarawak, despite the absence of significant foreign direct investment impacts on loan applications.

RHB maintained a BUY recommendation on ABMB, raising the target price (TP) to RM4.80 from RM4.40, indicating a 22% upside potential. The analysts emphasised ABMB's compelling valuation and solid loan growth prospects, noting its FY25F dividend yield of 6-7%, which is attractive for a fast-growing bank.

YTD loan growth across various sectors remained strong, with the bank expecting to continue surpassing industry growth rates, albeit slower than the previous year's 14%. Management noted a competitive loan market, particularly in the residential mortgage and SME segments. It indicated a strategic shift towards treasury assets to mitigate pressure on deposit costs and capital-intensive mortgage growth.

The bank's Net Interest Margin (NIM) faced pressure due to competition and rising deposit costs, exacerbated by aggressive strategies from digital banks. To counter this, ABMB planned to ease deposit growth and pivot funds towards less capital-intensive treasury assets, which could offer profit opportunities amid potential interest rate cuts.

Asset quality remained stable, with the bank's YTD performance meeting expectations and a credit cost guidance for FY25F of 30-35 basis points. ABMB also anticipated some recoveries in the coming fiscal year, further bolstering its financial stability.

Regarding Environmental, Social, and Governance (ESG) performance, ABMB reported an 18% reduction in operational emissions for FY24 compared to its FY20 baseline and started reporting Scope 3 financed emissions. The bank identified high-emission sectors for priority engagement and improved its sustainability reporting, earning an ESG score increase to 3.3 from 3.2, one of the highest among banks covered by RHB.

No changes were made to the bank's financial forecasts, with RHB adjusting the TP to RM4.80 after incorporating the higher ESG score and rolling forward the valuation base year to CY25F. This underscores the bank's solid fundamentals and growth prospects in a competitive market.