KUALA LUMPUR (May 27): Alliance Financial Group Bhd (AFG)’s net profit tumbled 40.97% on-year to RM93.27 million or 6.1 sen per share in the fourth quarter ended March 31, 2015 (4QFY15), from RM158.01 million or 10.4 sen, due to margin compression and fall in non-interest income.

In a filing with Bursa Malaysia, AFG (fundamental: 1.5; valuation: 1.9) said its revenue for the quarter under review shrunk 10.36% to RM306.05 million, from RM341.41 million in 4QFY14.

AFG proposed a second interim dividend of 6.4 sen, bringing the total dividends declared for FY15 to 15.4 sen, down almost half from the 29.50 sen it declared for FY14.

Full year earnings (FY15) dipped 5.81% to RM530.78 million or 34.8 sen per share, compared to RM563.55 million or 37.2 sen per share in FY14; while revenue rose a marginal 2.52% to RM1.383 billion in FY15, from RM1.349 billion in FY14.

In a press release, AFG's chief executive officer (CEO) Joel Kornreich said the group recorded a return on equity of 12.3% for FY15.

“The group registered a modest revenue growth of 2.5%, as the growth in net interest income from the expansion in the loans portfolio was partially offset by moderate margin compression and lower non-interest income from trading activities,” Kornreich said.

Net interest income grew by 5.4% to RM820.6 million for FY15, driven by net loans expansion of 14.9%, while growth in Islamic Banking income accelerated to 6.7%.

Net interest margins however, continued to be under pressure due to increased competition for retail deposits, ahead of the implementation of the new liquidity coverage ratios, said AFG in the release.

Non-interest income for the year was RM337.3 million, with overall non-interest income down by RM22.1 million or 6.1%, due to lower trading gains from securities and revaluation of financial assets; the group's non-interest income ratio stood at 25.4%.

The bank’s gross impaired loans also declined to RM380.7 million, from RM442.8 million in FY14, while gross impaired loans ratio improved to 1% in FY15 (FY14: 1.4%).

The group’s net impaired loans ratio also improved to 0.6%, while loan loss coverage increased to 102.7% as at March 31 2015, the statement read.

AFG said it continues to maintain a liquid balance sheet with a healthy loan-to-deposit ratio of 82.8% as at March 31, 2015.

The bank said customer deposits grew 13.7% for the year to RM44.6 billion, while Current Account Savings Account (CASA) deposits grew 12.5% to RM15 billion.

“The Group’s CASA ratio at 33.6% remains amongst the highest in the industry,” said Kornreich.

AFG said it will continue to capitalise on its strength in the small and medium enterprise (SME) segment, as well as transactional and business banking to generate sustainable revenue growth.

“The focus areas for FY16 will be to further improve asset efficiency as measured by risk adjusted returns, ensure deposits growth exceeds loans growth and continue to grow customer based non-interest income," said Kornreich.

At 2.47pm, AFG shares shed 4 sen or 0.86% to RM4.63, with a market value of RM7.17 billion.  

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)