Friday 29 Mar 2024
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KUALA LUMPUR (May 30): CIMB IB Research has maintained its “Hold” on Alliance Bank Malaysia Bhd at RM3.74 with a lower target price of RM3.82 (from RM4.18) and said Alliance Bank’s FY3/19 core net profit was below expectations at 90% of house forecast due to higher loan loss provisioning (LLP) and weak non-interest income.

In a note May 29, the research house said net interest margin expanded 10 basis points in FY19 but it expects that to contract in FY20F due to the negative impact of the cut in overnight policy rate (OPR).

“We make two changes to our FY20-21 EPS forecasts – (1) factoring in the rate cut lowers our FY20-21F EPS by about 6%; and (2) raising projected LLP by about 25%.

“These changes led to an 9% drop in our FY20-21 EPS forecasts and a decline in our DDM-based target price from RM4.18 to RM3.82.

“We maintain our Hold call on Alliance as we expect margin erosion in FY20F,” it said.

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