KUALA LUMPUR (Aug 27): Shares in Alliance Bank Malaysia Bhd slumped as much as 26 sen or 8% to RM2.99, after the group announced at the noon break today its quarterly net profit for the three-month period ended June 30, 2019 (1QFY20) nearly halved.

At 2.45pm, the counter recorded a turnover of some 2.33 million shares and was one of Bursa Malaysia's largest decliners, trading at RM3.02, still 23 sen or 7.08% lower than its last closing price.

The banking group had earlier today, in an exchange filing, announced a 44% drop in net profit to RM76.69 million in 1QFY20, from RM136.37 million in the year-ago quarter, although quarterly revenue came in at RM406.93 million, up 1.5% from RM401.07 million in 1QFY19.

It attributed the weaker profitability to credit losses stemming from impairment of several large accounts, as well as continued investment in the group's IT infrastructure under its transformation initiatives.

Meanwhile, the group highlighted that its net income grew 1.5% to RM406.9 million, despite the overnight policy rate (OPR) cut in May.

Alliance Bank said this was driven by net interest income growth of RM4.9 million or 2% year-on-year (y-o-y) from the loan expansion and the improved loan mix from better risk adjusted return loans.

Gross loans and advances grew 6% y-o-y to RM42.7 billion, it said, adding however that there has been net interest margin (NIM) compression arising from the OPR cut and deposit competition moderated the progression of net interest income.

Net credit cost was at 13.1 basis points (bps), an increase by 2.1 bps from the preceding quarter, due to the expected credit loss of a few large accounts.

Gross impaired loans (GIL) ratio increased by 18 bps from last quarter to 1.3%, mainly from the residential properties and personal financing portfolios, as well as a few large accounts.

Cost-to-income ratio was within the group's expectation at 48.7%.

"The group continues to invest in IT infrastructure to support its transformation initiatives. This has resulted in reasonably good revenue in 1QFY20, and led to increased profitability in our core businesses of consumer and small to medium enterprise (SME) segments," said Alliance Bank.

For the year ahead, the group said its continued focus on strategic transformation initiatives will generate progress in its performance, despite the banking industry's lackluster outlook.

Group chief executive officer Joel Kornreich said Alliance Bank will remain vigilant in managing its credit portfolio, and prudent in its provisioning in view of the challenges enterprises face.

"Our focus is to provide consistent and excellent customer experience. We will also launch new digital propositions to enhance speed and simplicity in our service. We believe that doing so will help us accelerate our growth especially in the consumer and SME banking business," he explained in a separate statement.

At its current price of RM3.02, Alliance Bank has a market capitalisation of RM4.68 billion.