KUALA LUMPUR (Nov 30): Alliance Bank Malaysia Bhd's net profit for the second quarter ended Sept 30, 2017 (2QFY18) slipped 7% year-on-year to RM122.8 million from RM132.58 million, as operating expenses climbed.

Operating expenses grew 14% y-o-y to RM190.15 million from RM167.34 million. Allowance for losses on loans, advances and financing and other receivables, which about doubled to RM33.52 million from RM16.81 million, also weighed on earnings, its income statement filed to Bursa Malaysia today showed.

Its quarterly revenue or net income, however, was up 9% y-o-y to RM393.88 million from RM359.72 million. Net interest margin (NIM) came in at 238bps (basis points) an improvement of 15bps from 223bps, it said.

For the cumulative six months of FY18, Alliance Bank's net profit dipped 3% y-o-y to RM257.8 million from RM265.05 million, though revenue grew 8% to RM780.49 million from RM723.53 million as it saw higher net interest income and Islamic banking income.

Operating expenses grew 9% due to restructuring and cost strategic initiatives in the period, which pushed cost to income ratio to 47%. "Excluding restructuring cost and strategic initiatives, cost to income ratio stood at 44%," it said.

"Our financial performance indicates a steady and stable growth, with a strong Return on Equity (ROE) of 10%, which is above industry average," said its group chief executive officer Joel Kornreich in a separate statement today.

"We posted a net profit after tax of 274.3 million or 3.5% increase year-on-year (y-o-y) for business as usual activities. Pre-provision operating profit grew two times faster than historical compounded annual growth rate (CAGR), improving by 6.9% to RM413.9 million, even after transformation expenses," said Kornreich.

"Our focus on better risk adjusted returns (RAR) and improved loan mix contributed to an 11.8% y-o-y loan growth in better RAR portfolio. In 1HFY18, we recorded a growth of 9.1% in SME & Commercial, 10% in Consumer Unsecured and 13% in Share Margin under better RAR portfolio," Kornreich added.

Alliance Bank saw a steady growth in client based fee income as well, with a growth of 3.6% y-o-y, said Kornreich.

He added that focusing on growing their customer based funding, the group posted a 4.6% increase y-o-y in CASA (current and saving accounts), with an improved CASA ratio of 37.3%.

"We saw better numbers in core customer deposits with a growth of 7.3% y-o-y, and a healthy liquidity coverage ratio at 161%.

"We continue to post strong and sustainable capital ratios, with total capital ratio at 18.8%. The group issued two bond and sukuk programmes worth RM280 million in September and November 2017 respectively," said Kornreich.

Moving forward, following its corporate restructuring exercise in September 2017, Alliance Bank the group is now better positioned to improve costs and maximise corporate efficiency.

The group will continue to focus on developing innovative yet practical solutions to serve its customers, as well as enhancing existing operational systems for higher performance and productivity to complement its Transformation agenda and digital banking strategy, said Alliance Bank

Shares in Alliance Bank were up four sen or 1.1% to RM3.66 for a market capitalisation of RM5.67 billion.