This article first appeared in The Edge Financial Daily on July 26, 2019

KUALA LUMPUR: Alliance Bank Malaysia Bhd is looking to explore in virtual banking, but stressed that the idea of virtual banking “is not on the cards yet”.

Speaking to reporters at a press conference after its annual general meeting (AGM) here yesterday, chief executive officer (CEO) Joel Kornreich explained that he has yet to see much benefit from obtaining the virtual banking licence as the bank can already provide banking services electronically, via mobile or online.

“There is no limitation for us to provide these services for us as an entity, there is no really any value,” Kornreich added.

Kornreich noted that the bank is talking to potential partners, but pointed out that it “does not mean that [Alliance bank] is applying for virtual bank licence”.

Nevertheless, he said that this virtual banking licence will increase competition in the banking industry and will most likely lead to more partnerships in the industry for scaling up their businesses.

Earlier this year, Bank Negara Malaysia said that the virtual bank licensing requirements will be out by the end of the year.

Moving forward, to enhance its digital value propositions for customers, Kornreich said Alliance Bank earmarked RM50 million as capital expenditure in the financial year ending March 31, 2020 (FY20).

He noted that the bank has been launching more digital products and services to support more businesses, especially the small and medium enterprises (SMEs) amid the challenging economic outlook.

“We are putting in a lot of effort in accelerating to give all of that to SMEs. We are actually very sanguine about our ability to make a difference in the market and to compete very, very effectively,” said Kornreich.

“This year, we believe that we will continue to stay ahead of the market thanks to all these innovations,” he added.

In FY19, the bank stepped up on its digitisation efforts to provide faster, simpler, and more responsive service to its clients, it said in a statement yesterday.

It launched the Alliance Origination System, a workflow process that streamlines and automates credit process, reducing 60% of the normal processing time.

This quick turnaround time contributed to the 39% growth in SME loan disbursements, the bank added.

Kornreich said the bank has also rolled out digitisation of individual current account, savings account (Casa) openings, enabling customers to complete their account opening in as little as 15 minutes, from 45 minutes previously.

He added that the bank will progressively roll out its digitised same-day Casa opening this year.

Additionally, to further enhance customers’ banking experience, the bank has launched its mobile banking app, which saw 52,000 sign-ups within a year.

Meanwhile, with the overnight policy rate (OPR) cut of 25 basis points to 3%, Kornreich said this will have an impact on the bank’s profit.

He also noted that the gross impact would be RM40 million for the company. But, with the repricing of loans and deposits, coupled with the continued improvement of the mix of the loans, the bank believes that it will mitigate the impact from the OPR cut.

“At the same time we will continue to shift to higher risk adjusted returns loan, so that this will mitigate some of the [profit] margin will be around 2.4% to 2.45%,” said Kornreich, noting that profit margins were at 2.5% last year.

Commenting on the news that the bank’s paring down stake in its wholly-owned Alliance Investment Bank Bhd, Kornreich said the bank “recognise[s] that the investment banking is not an easy business to be in these days” as both the stock market is subdued and the opportunities in the capital markets are somewhat limited.

“But, having said that our investment bank continues to perform reasonably well,” said Kornreich. He also declined to comment on any merger and acquisitions pertaining to the investment bank.

“We continue to want to optimise the returns for the group and our ultimate focus is on SME and consumer.”

“We are making very good progress in digitising services and improving the services that we are giving customer,” he added.

Shares in Alliance Bank closed three sen or 0.81% lower at RM3.67 yesterday, valuing the bank at RM5.68 billion.