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This is the Third Quarter Analyst Briefing as at 31 December 2009 for Alliance Financial Group Berhad (AFGB).
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1
ALLIANCE FINANCIAL GROUP
ANALYST BRIEFING- 3QFY10 Results ended 31 December 2009 -
Sustaining The Trajectory
2
• 3QFY10 Financial Performance
AGENDA
• 3QFY10 Business Review
• Business Initiatives Update
• Q & A
3
Cautiously optimistic remains
Strong balance sheet and robust asset quality
• 2010 expected to show economic recovery with GDP uplift and job growth. National growth may be impacted by global trends, where the possibility of a weak recovery or a double-dip remains.
• Banking key challenges - tight spreads, product innovation, new entrants, expectations of
sector consolidation.
• Pre-requisite to grow asset size with improved margins as well as to underwrite various financial instruments serving our clients’ business aspirations.
• Vigilant about asset quality via an integrated risk management framework, hence minimal credit losses.
Underlying business momentum intact• Consumer and Commercial/SME banking – core earnings drivers for the Group.
• Operations remain robust and professionally managed under the Board’s supervision.
Key Messages
4
9 months 9 months
31 Dec 09 31 Dec 08 Variance
RM'mn RM'mn %
Net Interest Income 451.8 499.0 -9.5
Income From Islamic Banking 174.5 124.9 39.7
Net Interest Income + Income from
Islamic Banking626.3 623.9 0.4
Other Operating Income 157.5 168.2 -6.4
NET INCOME 783.8 792.1 -1.0
OPERATING EXPENSES (415.9) (397.5) 4.6
OPERATING PROFIT 367.9 394.6 -6.8
NET ALLOWANCE FOR LOAN
LOSS PROVISION(66.4) (97.0) -31.5
PROFIT BEFORE TAX 301.5 297.6 1.3
TAXATION (77.3) (69.6) 11.1
NET PROFIT 224.2 228.0 -1.7
• The Group’s PBT increased by
1.3% compared to corresponding
period last year is primarily due to
recovery of a corporate loan as
well as reduction of general
allowance rate to 1.5%.
• The Group’s other operating
income decreased by 6.4%
compared to corresponding period
last year is largely attributed to a
lower gain from the realisation of
investment securities despite
higher brokerage fees income.
9 Months Ended 31/12/09 Results Highlight
5
• The Group’s PBT increased 21.2%
or RM22.9mil compared to
preceding quarter due to lower
allowance for losses on loans and
financing and impairment on
investment securities.
3Q 2Q
31 Dec 09 30 Sep 09 Variance
RM'mn RM'mn %
Net Interest Income 153.8 152.9 0.6
Income From Islamic Banking 65.6 49.5 32.5
Net Interest Income + Income from
Islamic Banking219.4 202.4 8.4
Other Operating Income 57.7 46.7 23.6
NET INCOME 277.1 249.1 11.2
OPERATING EXPENSES (146.8) (126.8) 15.8
OPERATING PROFIT 130.3 122.3 6.5
NET ALLOWANCE FOR LOAN LOSS
PROVISION0.7 (14.2) -104.9
PROFIT BEFORE TAX 131.0 108.1 21.2
TAXATION (31.0) (30.0) 3.3
NET PROFIT 100.0 78.1 28.0
3Q Ended 31/12/09 Results Highlight
6
*Computed based on “normalized” cost/income
^Includes PDS
Nd - High due to PER write back from two lumpy loans provisions
% FYE FYE 3Q 4Q 1Q 2Q 3Q
31/03/08 31/03/09 31/12/08 31/03/09 30/06/09 30/09/09 31/12/09
Net interest margin 3.0 2.8 2.9 2.6 2.3 2.6 2.7
Cost of Fund 2.7 2.7 2.6 2.3 2.1 2.0 1.9
NFI / Total income 26.5 22.4 21.8 22.4 27.8Nd 24.0 24.5
Cost Income Ratio 49.6* 53.3 54.2 61.7 54.0 50.9 53.0
^ LD Ratio 82.5 79.9 87.5 79.9 86.9 96.0 94.5
RWCR 16.2 14.7 14.7 14.7 14.9 15.4 15.2
ROAA 1.4 0.8 1.1 0.8 0.6 0.8 0.9
ROAE 16.8 8.6 11.3 8.6 6.6 8.8 10.5
Gross NPL 7.0 4.5 5.2 4.5 4.5 4.1 3.9
Net NPL 3.3 1.8 2.2 1.8 1.9 2.0 1.9
Loan Loss Coverage 79.9 99.7 92.6 99.7 97.7 89.0 91.0
Quarterly Ratios
Key Financial Ratios
9 Months Ended 31/12/09 Results Highlight
7
RM'm
Total
Issuance
AFG's
Exposure
Total
Issuance
AFG's
Exposure
Total
Issuance
AFG's
Exposure
● Total Issuance 1,000m 175m (17.5%) 800m 240m (30%) 1,000m 10m (1%)
● Maturity Date
Kerisma Idaman Capital CapOne
Jun-09 Oct-11 Sep-10
Collaterized Loan Obligations (CLOs) are a matter of the past
• As at December 2009, the Group has made 96% provisions in Idaman Capital
• This compared to a portion of 55% as of June 2009
Key points: • Impairment provision – none
• Small exposure of AFG on it
• AFG has 100% exposure at super senior level
• Matured already
• Total exposure covered although expected write-backs will be used to cover provision for Idaman Capital in particular
Update on CLOs
8
• 3QFY10 Financial Performance
• 3QFY10 Business Review
• Business Initiatives Update
• Q & A
9
-10
-5
0
5
10
15
20
25
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Industry AFGCommercial/SME (AFG)
Consumer (AFG)
Corporate (AFG)
Consumer (Industry)
Corporate (Industry)
Commercial/SME (Industry)
Business transformation puts AFG on right target mix
Loans growth (%YoY) – AFG in-line with industry
Loans Segmentation
Dec 06 Dec 09 Dec 06 Dec 09
33.4%
51.3%48.7%
15.3%30.6%
20.7%32.0%
49.7%60.2%
18.3%
25.6%
12.9%
1.3%
Core strengths in Consumer & Commercial Banking
• Loans portfolio, previously heavily skewed towards Corporate Banking has been reshaped towards our desired mix – Consumer and Commercial Banking along with market growth and opportunities
• Supported by strong local execution capabilities and competitive product suite
Industry Alliance Bank
10
1,500
1,800
2,100
2,400
2,700
3,000
Dec-06 Sep-07 Jun-08 M ar-09 Dec-09
-40
-25
-10
5
20
35
50
RM mil - lhs
% QoQ - rhs
3,500
4,000
4,500
5,000
5,500
6,000
Dec-06 Sep-07 Jun-08 M ar-09 Dec-09
-12
-7
-2
3
8
13RM mil - lhs
% QoQ - rhs
6,000
7,500
9,000
10,500
12,000
13,500
Dec-06 Sep-07 Jun-08 M ar-09 Dec-09
2
4
6
8
10
RM mil - lhs
% QoQ - rhs
Loans growth primarily driven by Consumer Banking
Note: - * – not comparable due to retagging with mass market
FYE FYE FYE
RM Mil 31/3/07 31/3/08 31/3/09 1Q 2Q 3Q •YoY •QoQ
Consumer 7,206 8,828 10,832 11,869 12,172 12,621 n. c. 3.7%
Commercial
/SME 4,238 5,253 5,859 5,232 5,362 5,377 n. c. 0.3%
Corporate 1,910 1,839 2,567 2,577 2,731 2,698 3.2% -1.2%
Exit Books 1,139 625 333 306 288 276 -40.0% -4.2%
Total 14,493 16,545 19,591 19,984 20,553 20,972 8.0% 2.0%
% changeFYE 2010
*
*
*
*
*
*
Loans Breakdown by Businesses Consumer
Commercial / SME
Corporate
Loans Growth Segmentation
• AFG loans growth of 8.0% in-line with industry of 7.8% as of Dec 09
• AFG loans growth momentum holding steadily at +2.0%QoQ in 3QFY10, albeit slower compared to +2.8%QoQ in 2QFY10
• Exit book loans has gone down to RM276 million in 3QFY10 from RM306 million in 1QFY10
*
*
11
25%
35%
45%
55%
65%
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Industry AFG
23%
27%
31%
35%
39%
43%
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Industry AFG
1.8%
2.2%
2.6%
3.0%
3.4%
3.8%
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Industry AFG
2.2%
2.4%
2.6%
2.8%
3.0%
3.2%
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Industry AFG
Improving CASA driving down cost of funds
Earnings Check Points
3.1%
2.8%
3.1% 3.1%
2.9%
2.3%
2.6%2.7%
2.7%
2.7%
2.7% 31.6%
33.8%
32.5%
35.1% 35.6% 35.5%
34.6%
40.9%
25.5%
25.5%
24.8%
25.3% 25.3% 25.3%
25.4%
3.0% 3.0%2.9%
2.7%2.6% 2.6%
2.1%
1.9%
3.1%
3.4% 3.4%3.2%
2.9% 3.0%
2.2%
55.4%
53.7%
54.5%
49.6%
28.7%
48.2%
54.3% 54.0%53.0%
61.7%
45.3%42.9%
43.6%46.1%
48.1%
46.0%
Visible improvement in net interest margin CASA ratio at top quartile of the industry
Lower than industry’s cost of funds AFG’s cost-income ratio decelerating fast
2.6%
2.8%
2.6% 2.6%
2.7%
2.0%
26.7%
48.6%
12
Cost management – one of the key drivers of improved bottom-line
% share of total operating expenses % YoY growth
Gearing Up for Greater Efficiency
Mar09
58.8%
Jun09
62.1%
Personnel Cost
58.1% 58.5%
4.0%
22.9%
-8.7%
5.3%
Sep09 Dec09 Mar09 Jun09
Establishment Costs
24.2% 28.3%
11.0%
6.7%
25.8%
-8.7%
Sep09
27.4%
17.0%
Dec09 Dec09Mar09
58.1%
Jun09
Marketing Expenses
5.0%
2.6%
-27.2%
23.7%
2.3%
Sep09
22.3%
3.3%
-6.2%
Mar09
58.1%
Jun09
Admin & General Expenses
12.6% 10.5%
22.9%
15.0%
9.9%
Sep09
1.8%
10.4%
-19.5%
Dec09
13
0.0
1.0
2.0
3.0
4.0
5.0
M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-09 Dec-09
0
300
600
900
1200
1500
M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-09 Dec-09
0.0
2.0
4.0
6.0
8.0
10.0
M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-09 Dec-09
0
20
40
60
80
100
M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-09 Dec-09
Improving asset quality, resulting in minimal credit losses
Loan Loss Coverage – In line with industry
AFG’s gross NPL ratio – declining further
AFG Industry
87%
100%
93%
83%
91%
83%85%
78%80%
77%
AFG Industry
AFG’s net NPL ratio in line with industry
AFG Industry
Net NPL ratio lower
than industry since
Jun083.3%
3.0%2.7%
2.8%
2.3%2.5%
2.2%2.4%
1.8%
2.2%
7.0%
6.0%5.4% 5.2%
4.5%
5.3%4.8%
4.5% 4.3%4.1%
98%
88%
4.5%3.9% 1.9%
2.2%
89%
88%
4.1%
3.8% 2.0%
2.1%
Loan Asset Quality
Non Performing Loans remains manageable
Gross NPL Net NPL
1,158
1,032 1,009 1,016
875
522452
413 411343 366
890
403
845
91%94%
3.9%
3.2%
827
391
1.9%1.8%
14
10 11 12 13 14 15 16
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
4 6 8 10 12 14
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
10 11 12 13 14 15 16 17
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Strengthened balance sheet with strong capital position
AFG’s RWCR @ 15.2% vs Industry’s 14.7%
AFG and ABMB Core Capital
ABMB’s RWCR @ 13.6% vs Industry’s 14.2%
AFG Industry
Core Capital (AFG) Core Capital (ABMB)
ABMB Industry
13.0%14.9%
13.1%
12.2%12.7%
12.5%13.1%
10.2%12.2%
10.4%12.7%
12.6%
14.7%
14.7%
14.9%
12.6%
13.6%
14.8% 14.3%13.2%
12.7%
10.3%
10.5%
• AFG’s core capital and RWCR continued to improve to 11.1% and 15.2% in 3QFY10 compared to 10.5% and 14.9% in 1QFY10
• In turn, this has strengthened AFG’s balance sheet ability to take stresses, as reflected in higher equity-to-asset ratio (9.3% in 3QFY10 from 9.0% in 1QFY10)
15.4%14.6%
13.2%11.1%
13.1%
14.1%13.5%
Capital Adequacy Management
14.7%15.2%
11.0%13.3%
14.2%13.6%
15
• 3QFY10 Financial Performance
• 3QFY10 Business Review
• Business Initiatives Update
• Q & A
16
Employees ShareholdersCustomers Community
MissionWe will deliver excellent customer experience through strategic alliances
and enhanced group synergy, employing best in class technology and human capital.
Values
Caring Conviction Integrity Resilience Creativity
Risk & Compliance
Sales &
Service
Performance
Culture
Service
Quality
Branches &
Hubs3rd PartiesDirect Marketing
Mass MarketSME / Mass
Market
SME
/CommercialLarge
Corporate
Regional Hubs &
HO
Consumer IslamicCommercialWholesale &
Investment Bank
VisionA leading integrated financial solutions provider with regional reach,
delivering the best customer experience and creating long term shareholder value.
CARING CONVICTION CREATIVITY RESILIENCE INTEGRITY
Group Strategy
17
Alliance Bank Strategic Priorities
3rd Vertical
Commercial Non
Programme
Active
Financial
Market
Integrated
Wealth
Management
Consumer
Banking
Segment Based
Drive
High Yield
‘Koop’ Loans
Navigate to Win
Stock-broking
Transformation
Primary focus to strengthen business fundamentals
18181818
THANK YOU
Investor Relations
Alliance Financial Group7th Floor, Menara Multi-Purpose, Capital Square
8 Jalan Munshi Abdullah
50100 Kuala Lumpur, Malaysia
www.alliancebank.com.my/investorrelations.html