KUCHING: Alliance Financial Group Bhd’s (Alliance) loan growth is turning softer and is likely to moderate from 15.2 per cent year on year (y-o-y) in first quarter financial year 2015 (1QFY15).
Analysts from MIDF Amanah Investment Bank Bhd’s research division (MIDF Research) noted that momentum for loan applications has slowed down.
“We understand that its growth in loans for purchase of residential property is moderating. This is in line with broader industry trend.”
As a late entrant into the market for hire purchase (HP) financing, the research house understand that it has to target a niche market to grow its HP loan book. One of the Group’s focus areas is on independent car dealers to finance grey import vehicles.
Financing of new cars and non-snational marque vehicles constitute 83 per cent and 81 per cent respectively of its total loans for purchase of transport vehicles.
Growth in loans for purchase of commercial property likely to remain strong underpinned by SMEs’ acquisition of properties for business operations. Growth in loans for purchase of commercial property has been gaining traction since 2QFY14.
Most of its financed commercial properties are in Klang Valley. The strong growth has been contributed largely by its SME customers’ acquisition of commercial properties. The Group’s micro SMEs have expanded in their business operations over time.
These SMEs have been nurtured by the Group and were needed to purchase commercial properties due to their business expansion.
“At initial stage of banking relationship, transaction banking services have been offered to these SME customers. The Group sees this as essential step in growing its current account, savings account (CASA).
“The Group’s strategy of growing CASA is mainly though its SME customers which it has nurtured over years of banking relationship with them and expanded their business operations,” said MIDF Research.
Business banking loans grew 13.5 per cent y-o-y in 1QFY15 supported by a strong SME loan growth of 19.9 per cent y-o-y and Corporate and Commercial loan growth of 8.8 per cent y-o-y.
Slower momentum in growth of Corporate and Commercial loans is anticipated with gross domestic product (GDP) numbers expected to turn softer with a moderation in export growth.
“We have already factored in a conservative loan growth assumption of 11 per cent into our FY15 forecast which is lower than the gross loan growth of 15.2 per cent observed in 1QFY15,” said MIDF Research.
Looking ahead, challenges remain ahead on Treasury income in particularly due to lower foreign exchange (FX) gains and gains from sales of securities. Treasury income accounted approximately one third of the Group’s net order imbalance indicator (NOII).
Also, slower equity capital market from lack of large equity IPOs is expected to continue to impact its corporate advisory fees albeit a smaller impact compared to peers.