1 1 ALLIANCE FINANCIAL GROUP TELE-CONFERENCING WITH ANALYST - 1QFY10 Results ended 30 June 2009 - STAYING ON COURSE
Nov 12, 2014
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ALLIANCE FINANCIAL GROUP
TELE-CONFERENCING WITH ANALYST
- 1QFY10 Results ended 30 June 2009 -
STAYING ON COURSE
2
• 1QFY10 Performance & Business Review
AGENDA
3
Charting through turbulent times
Key Messages
Well positioned to respond to market shifts
• FOMC – economic activity is leveling out and accommodative policy is here to stay
• Increasingly liberalized regulatory and operating environment
• Focusing on core strengths in Consumer and Commercial Banking
• Continuing to build long-term deposit funding base
• Harnessing the energy of 3-year business transformation program
Driving and leveraging our competitive position
• Drive asset quality via an integrated risk management, resulting in minimal credit losses
• Strengthen balance sheet with strong capital position and high liquidity
• Drive cost efficiency through operational excellence
• Emphasize superior service levels
4
Charting Through Turbulent Times
Sub-prime & Crisis
Oct’ 07 to Dec’ 08
Green Shoots
Jan’ 09 - nowCalm before Storm
Jan’ 05 to Oct’ 07
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
-30
-20
-10
0
10
20
30
KLCI S&P500 3-MA Exports - rhs
Sub-prime & Related Crisis
Stimulus Programme
①
②
② Bankcorp – loan defaults, to raise capital
① Fannie Mae – write down, to raise capital③
③ Merrill Lynch – write off, sells shares
④
④ Citigroup – loss on credit costs, cut jobs
⑤
⑤ Bear Stearns boss Cayne resigns
⑥
⑥ Citigroup – increases stock offering
⑦
⑦ Lehman cuts 130bn of assets
⑧
⑧ Blackstone posts $251mn loss
⑨
⑨ Freddie Mac dips below $10 since 1992
⑩
⑩ JP Morgan takes $1.5bn hit in Jul08
⑪
⑪ Morgan Stanley plans add layoffs
⑫
⑫ GE - FDIC backing for $139bn in debt
Ⓐ
Ⓑ
Ⓒ
Ⓐ Malaysia - RM7bn ($1.93bn) stimulus
Ⓑ US - $787.2bn economic stimulus
package by President Barack Obama
Ⓒ Malaysia - RM60bn “mini budget”
Charting Through Turbulent Times
5
Results Achieved
Business Fundamentals Remain Intact
FRS 139 Initiative
& Restructuring
April’ 06 to Mac’ 07 April’ 07 to December’08
151
255
502
Mar 06 Sept 06 Mar 07 Sept 07 Mar 08
14
230
Sept 08
Maximizing
Revenue
298
Dec 08
303.3
Mar 09
31% 49% 33% 51% 33%68%
32%
72%35%
80%35%
91%
35%
93%
33%
100%
5.5%
8.0%
9.5%
4.4%3.3%
2.3%2.2%
1.8%
Loan Loss Coverage (%)
CASA Ratio (%)
Net NPL Ratio (%)
YTD Profit Before Tax (RM’m)
Included RM51.8m
Overhead
provision written
back
Prudently, made
additional
RM56.5m SP
Charting Through
Turbulence Time
Dec 08 onwards
98%
35%
June 09
62.4
1.9%(283)
(1QFY10 only)
6
• Group PBT decreased 62.6%
compared to corresponding period last
year on the back of higher impairment
on securities by RM25.9mil made on
potential losses against a declining
economic conditions.
• Higher allowance for loans primarily
due to lower recoveries this quarter.
• Lower operating profit mainly due to
lower gain on revaluation of forex
derivatives instruments and at the
same time there was a lumpy gain of
RM13.3mil on redemption of debt-
converted securities last year.
• The Group’s net interest income
declined by 21.7% mainly due to OPR
drop.
30 Jun 09 30 Jun 08 Variance
RM'mn RM'mn %
OPERATING REVENUE 387.9 421.5 -8.0
Net Interest Income 141.8 181.1 -21.7
Income From Islamic Banking 58.8 39.1 50.4
Net Interest Income + Income from
Islamic Banking200.6 220.2 -8.9
Other Operating Income 53.0 69.2 -23.4
NET INCOME 253.6 289.4 -12.4
OPERATING EXPENSES (137.0) (139.4) -1.7
OPERATING PROFIT 116.6 150.0 -22.3
(ALLOWANCE)/WRITE BACK FOR
LOAN LOSS PROVISION(54.2) 16.9 -420.7
PROFIT BEFORE TAX 62.4 166.9 -62.6
TAXATION (16.2) (42.6) -62.0
NET PROFIT 46.2 124.3 -62.8
3 Months Ended 30/6/09 Results Highlight
7
• Group PBT increased RM56.8mil
compared to preceding quarter due
to:-
Lower loan loss provisions
Income from Islamic Banking
increased 49.6% due to Profit
Equalization Reserve write back
as a result of two lumpy Islamic
loans provisions
Current quarter overheads was
lower as last quarter the Group
made additional cost for
continuous manpower
rationalization exercise to improve
productivity and efficiency
Net Interest Income decreased by
7.5% due to full impact of OPR
drop of 150 bps
1Q 4Q
30 Jun 09 31 Mar 09 Variance
RM'mn RM'mn %
OPERATING REVENUE 387.9 398.4 -2.6
Net Interest Income 141.8 153.3 -7.5
Income From Islamic Banking 58.8 39.3 49.6
Net Interest Income + Income from
Islamic Banking200.6 192.6 4.2
Other Operating Income 53.0 60.1 -11.8
NET INCOME 253.6 252.7 0.4
OPERATING EXPENSES (137.0) (156.0) -12.2
OPERATING PROFIT 116.6 96.7 20.6
(ALLOWANCE)/WRITE BACK FOR
LOAN LOSS PROVISION(54.2) (91.1) -40.5
PROFIT BEFORE TAX 62.4 5.6 1,014.3
TAXATION (16.2) (4.8) 237.5
NET PROFIT 46.2 0.8 5,675.0
3 Months Ended 30/6/09 Results Highlight
8
*Computed based on “normalized” cost/income
^Includes PDS
Nd - High due to PER write back from two lumpy loans provisions
% FYE FYE 1Q 2Q 3Q 4Q 1Q
31/03/08 31/03/09 30/06/08 30/09/08 31/12/08 31/03/09 31/06/09
Net interest margin 3.0 2.8 3.1* 3.1 2.9 2.6 2.3
Cost of Fund 2.7 2.5 2.6* 2.7 2.6 2.3 2.1
NFI / Total income 26.5 22.4 24.3 21.3 21.8 22.4 27.8Nd
Cost Income Ratio 49.6* 53.3 50.0* 49.5 54.2 61.7 54.0
^ LD Ratio 82.5 79.9 82.6 85.4 87.5 79.9 86.9
RWCR 16.2 14.8 15.1 14.9 14.7 14.7 14.9
ROAA 1.4 0.8 1.8 1.3 1.1 0.8 0.6
ROAE 16.8 8.6 18.8 13.5 11.3 8.6 6.6
Gross NPL 7.0 4.5 6.0 5.4 5.2 4.5 4.5
Net NPL 3.3 1.8 2.7 2.3 2.2 1.8 1.9
Loan Loss Coverage 79.9 99.7 85.5 91.2 92.6 99.7 97.7
Quarterly Ratios
Key Financial Ratios
3 Months Ended 30/6/09 Results Highlight
9
Group Strategic Priorities
Our primary focus is to further strengthen the Group’s business
fundamentals and to put the Group in an advantageous position to
take market share when the economy recovers
Strategic priorities Key initiatives
Pro-active Capital
Management
● Alliance Financial Group has made available additional RM600 million standby funds
for any opportunistic investment
● To protect earnings
Liquidity
Management
● To maintain a strong liquidity position with sustainable loans to deposit (LDR) ratio
● Investment securities are biased for liquid assets
Robust Risk
Management &
Credit Portfolio
Quality
● Proactive review of credit underwriting policies and standards
● Pre-emptive provisioning due to deteriorating economic conditions
● Continue to build and strengthen risk management infrastructure
Operational
Efficiency & Cost
Management
● Manpower management like staff redeployment, hiring freeze, natural attrition etc
● Leverage synergy among with further rationalization among key businesses.
● Cost containment exercise
10
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
11
Loans Growth Segmentation
Past 3-year Transformation Puts AFG on Right Target Mix
Loan Portfolio – As at FYE 30/6/09
55%32%
10%
3%
59%26%
13%
2%
Loan Portfolio – As at FYE 30/6/08 Loans Breakdown by Businesses
• AFG loans growth (15.5%YoY) outpaced industry
(8.3% as of June 09)
• AFG loans growth +2.0%QoQ in 1QFY10 compared
to 0.8%QoQ in 4QFY09
• Although Corporate Banking loans grew by
46.7%YoY, it is on the back of much reduced loan
base, and the loan portfolio mix is within the target mix
(within 15%)
Loans Size
- RM17.3bn
Loans Size
–RM20.0bn
Note: - n.c. – not comparable due to retagging with mass market
FYE FYE FYE
RM Mil 31/3/08 31/3/09 30/06/09 •YoY •QoQ
Consumer 8,828 10,837* 11,869* n.c. 3.2
Commercial
/SME 5,253 5,192* 5,232* n.c. 0.8
Corporate 1,839 2,567 2,577 46.7 0.4
Exit Books 625 333 306 -47.1 -7.9
•Total 16,545 18,929 19,984 15.5 2.0
% change
12
Monetary Easing Edging Closer to End Cycle
Stresses on Net Interest Margin Lessen With Stable OPR
Sep07 Mar08 Jun08 Sep08 Dec08 Mar09
3.5% 3.5% 3.5% 3.5%
3.25%
2.0%
5.32%
5.42%
5.45%(n)
5.43%
5.22%
4.69%
OPR
Earning Assets Yield Net Interest Margin
2.95%3.02% 3.12%(n) 3.05%
2.89%
2.56%
• NIM fell further to 2.34% on the back of 150bps cut in
OPR rate to 2% since Nov 08
June 2008 June 2009
Variable Rate Loans (AFG) Fixed Rate Loans (AFG)
83.2% 85.3%
16.8% 14.7%
• AFG has higher than industry average variable
rate loans
• Industry average variable rate loans rose to
67.8% in June 09 compared to 66.5% a year agoNote: (n) –Normalized
Net Interest Margin
(Industry)
2.55% 2.62%2.65% 2.63%
2.73%2.58%
66.5%
Variable Rate Loans (Industry) Fixed Rate Loans (Industry)
66.3%
33.7%33.5%
Jun09
2.0%
4.18%
2.34%
2.65%
13
CASA Ratio at Top Industry Quartile
Higher CASA Keeps Cost of Funds Heading South
Sep07 Mar08 Jun08 Sep08 Dec08 Mar09
32%
(25%)
35%
(25%)
36%
(25%)35%
(25%)35%
(25%) 33%
(24%)
CASA Ratio Cost of Funds (AFG)
2.71% 2.67% 2.61%(n)2.71%
2.62%
2.29%
21.2 21.4
21.7
22.723.1
25.6
RM bn
Deposit Portfolio – As at FYE June2009
60%
Deposit Portfolio – As at FYE June2008
36%
3.6%
56%
35%
6.4%2.9%
Fixed deposit
CASA
Money Mkt
NID
3.29%2.94%
2.88%2.93%
2.92%
2.54%
Cost of Funds (Industry)Note: ( ) – CASA Industry
(n) – Normalized
Fixed deposit
CASA
Money Mkt
NID
Structured Deposit
24.3
2.18%
2.08%(n)
35%
(25%)
35%
(25%)
Jun09
14
Costs Have Been Carefully Managed for Greater Efficiency
Gearing Up for Greater Efficiency
Dec08 Mar09
58.6%
58.1%
Jun09
58.5%
Personnel Cost
58.1% 58.5%
11.0%9.2%
-11.6%
% share of total operating expenses % QoQ growth
Dec08 Mar09
24.3%
58.1%
Jun09
58.5%
Establishment Costs
24.2% 28.3%
-3.9%
9.8%
2.6%
Dec08 Mar09
3.7%
58.1%
Jun09
Marketing Expenses
5.0%
2.6%
50.1%
-54.1%
122.9%
Dec08 Mar09
13.4%58.1%
Jun09
58.5%
Admin & General Expenses
12.6%10.5%
3.6%
-26.7%
54.4%
15
0.0
1.0
2.0
3.0
4.0
5.0
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
0
300
600
900
1200
1500
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
0
20
40
60
80
100
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
Loan Asset Quality
Loan Loss Provision at Top Quartile of Industry
Loan Loss Coverage – Higher than industry
AFG’s gross NPL ratio – flat
Non Performing Loans remains manageable
AFG Industry
87%
100%
93%
83%
91%
83%85%
78%80%
77%77%
73%72%
71%
AFG Industry
Gross NPL Net NPL
AFG’s net NPL ratio lower than industry
AFG Industry
Net NPL ratio lower
than industry since
Jun08
4.4%
3.5%3.7%
3.2% 3.3%
3.0%2.7%
2.8%
2.3%2.5%
2.2%2.4%
1.8%
2.2%
8.8%
7.9%
7.0%
6.0%5.4% 5.2%
4.5%
5.9% 5.6%5.3%
4.8%4.5% 4.3%
4.1%
1,3541,252
1,158
1,032 1,009 1,016
875
643567
522452 413 411
343
98%
88%
366
890
4.5%
3.9%
1.9%
2.2%
164 6 8 10 12 14
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
10 11 12 13 14 15 16
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
10 11 12 13 14 15 16 17
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Capital Adequacy Management
RWCR – Higher Than Industry Average
AFG’s RWCR @ 14.9% vs Industry’s 14.0%
AFG and ABMB Core Capital
ABMB’s RWCR @ 13.2% vs Industry’s 13.6%
AFG Industry
Core Capital (AFG) Core Capital (ABMB)
ABMB Industry
13.0%14.9%
13.6%15.1%
13.3% 16.2%
12.9%13.1%
12.2%12.7%
12.5%13.1%
13.0%12.9%
12.7%14.7%
10.2%12.2%
10.4%
12.5%
10.4%12.5%
11.2%
12.7%
12.6%
14.7%
14.7%
14.9%
12.7%
13.4%
14.0% 13.6%13.2%
12.7%
10.3%
10.5% • AFG’s core capital and RWCR continued to
improve to 10.5% and 14.9% in 1QFY09
compared to 10.3% and 14.7% in 4QFY09.
• In turn, this has strengthened AFG’s balance
sheet to take stresses, as reflected in higher
equity-to-asset ratio (9.0% in 1QFY10 from
8.7% in 4QFY09).
17
Consumer Banking
Strategic Priorities
Better
Manage
Portfolio
Health
Deliver
Productivity &
Efficiency
Enhancements
Scale Up &
Defend
Profitable
Customer
Franchise
Protect
Earnings
Deliver Better
Distribution
Leverage
Navigate to Win
Cost
Optimisation
• reshape revenue streams & rebalance mix
• revamp channel mix, baseline annuity income
• revamp channel mix,
baseline annuity income
• de-prioritize LT investments
• cross biz synergies• exploit outsourcing
• optimize asset utilization rate
• intensify collection efforts
• recalibrate performance incentives
• differentiated service platform
18
Commercial/SME Banking
Strategic Priorities
Mass Market
NIM
Enhancement
Cost
ManagementNavigate to Win
Risk
Management
• drive cross-selling to existing customers
• CASA drive; loan re-pricing
• cost reduction – marketing,
premises & staff hiring &
redeployment
• defer non-essential projects
• new credit scorecard
• greater emphasis on early
warning & remedial units to
contain credit losses
• new credit program &
commission scheme
19
Corporate Banking
Other Units
Strategic Priorities
Alliance Islamic Bank
Investment Banking
• Aggressive re-pricing
• Zero credit loss
• Cost containment
• Cash management
• Cross-selling CF & DCM
• FX – New mindset
• Personnel financing – cashvantage & Koperasi
• Hire purchase
• Syariah compliance
• Stock-broking transformation
• Cross-selling between various business units
• Restructuring advisory / independent advisory – bread & butter
Financial Market
• Increase client distribution
• Increase system capabilities thru MUREX
20
Information Technology as a Successful Enabler
• Culminating to the efforts in providing the best of class technology to serve business
needs, the Group was honored with two awards:
Technology Business Review Asean –
Corporate Award for Excellence &
CEO Award for LeadershipIDC Financial Insights –
Enterprise Transformation Award
(Unprecedented category)
• During the IDC Financial Insights award presentation, the following citation
was made:
“”Alliance Bank's strategy of applying technology excellence to
create sustainable business value has led the bank to deploy an
impressive enterprise-wide transformation ranging from enterprise
architecture to risk management. This comprehensive initiative saw
an effective collaboration between Alliance Bank and its technology
partners in successfully positioning the bank's IT organization to
support its strategic goals …. (FIIA)“”
Long Term Value
Creation
21
Key Take Away
- Business Fundamentals Remain Intact.
- Costs Have Been Carefully Managed for Greater Efficiency.
- Asset Quality Continues to Improve.
- Well Capitalized. Ahead of Industry Average.
In Summary
- Cautiously Optimistic. We Are Here For The Long Haul.
22222222
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