KUALA LUMPUR (Nov 27): Alliance Financial Group Bhd reported a 25.3% drop in net profit for its second financial quarter ended Sept 30, 2015 (2QFY16) to RM134.66 million or 8.8 sen per share, from RM180.33 million or 11.9 sen per share a year ago.

Meanwhile net interest income fell 3.6% to RM213.12 million in 2QFY16 from RM221.139 million in 2QFY15.

For the first six months ended Sept 30, 2015 (1HFY16), the group reported a 17.5% drop in net profit to RM256.59 million or 16.8 sen per share from RM311.14 million or 20.5 sen per share due to higher allowance for losses on loans in 1HFY16 and a gain from disposal of land, which was recorded in 1HFY15, it said in its filing to Bursa Malaysia today.

Nevertheless, Alliance declared an interim dividend of 8 sen per share, representing a dividend payout ratio of 48.3%, which will be paid on Dec 30, 2015.

Net interest income for 1HFY16 came in at RM420.889 million compared to RM420.96 million a year ago.

The group recorded a return on equity of 11.5% for 1HFY16. The gross impaired loans ratio remained stable at 1.1% as at September 2015 (industry 1.6%) with loan loss coverage of 92.7%.

Net loans and advances stood at RM37.6 billion, growing 10.2% year-on-year (y-o-y) and 5.8% on an annualised basis. The group's loan origination efforts were focused on the better risk adjusted return loans, namely in small to medium enterprise, commercial and consumer unsecured lending.

Alliance group chief executive officer Joel Kornreich said that despite the challenging environment, the group's business momentum remains strong in its core areas of focus such as consumer and business banking, and the group has also sustained excellent asset quality.

"We made significant progress in reshaping the balance sheet to more effectively defend our margins, with the shift in loan origination strategy, and the optimisation of funding mix and cost of funds, [and] we are also improving our client based fee income activities and are strengthening our capital ratios," he said in a separate statement today.

He added that despite an overall market contraction, current and savings accounts (CASA) deposits were 3.3% higher y-o-y at RM14.8 billion.

"The group's CASA ratio at 33.6% remains among the highest in the industry … further, the loans to deposits ratio remains healthy at 86.2%, well below the industry average of 90.1%," said Kornreich.

On Alliance's prospects, he said that given the more challenging operating environment, the group will remain focused on effective risk management and executing the business strategies of efficient loans growth, optimisation of funding mix, improving client based fee income and containing expense growth.

At 3.13pm, Alliance shares were down two sen or 0.56% at RM3.53, with 28,700 shares traded and a market capitalisation of RM5.47 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.)