Full Year Analyst Briefing as at 31 March 2012

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This is the Full Year Analyst Briefing as at 31 March 2012 for Alliance Financial Group Berhad (AFGB).

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Full Year Analyst Briefing as at 31 March 2012

  1. 1. ANALYST BRIEFING Financial Year Ended 31 March 2012
  2. 2. Contents1 Executive Summary2 Financial Results for FY2012 1
  3. 3. Our Business Model Our Business Model… “To Build Sustainable and Predictable Financial Performance”Line of Business Investment Consumer SME Wholesale Treasury Islamic BankStrategy Revenue: Driving Fee Income through Cross-Selling ROE; CIR Major Products CONSUMER BANKING BUSINESS BANKING • Mortgage Loans • SME • Wealth Management • Credit Cards • WHOLESALE • Bancassurance • Personal Loans • Transaction Banking • Hire Purchase  Cash Management • Advisory • Deposits  Trade Finance • Treasury Sales • Stockbroking • Investment Banking Existing Existing New Growth Opportunities Opportunities Opportunities 2
  4. 4. Medium Term Targets We achieved good progress against our 3-Year Medium Term Targets FY2012 – FY2015 FY2012 Achievement Asset Quality … gross impaired loans to be better than industry average 2.4%   Non InterestIncome Ratio … to increase non-interest income to 30% of total revenue 26.8% … move to industry average (45% - 48%) through:Cost to Income Ratio • targeted revenue growth • improved productivity 47.3%  … achieve industry average (14% - 16%) through: Return on Equity • focus on underlying earnings momentum • effective capital management 13.6%  … pay “as much as we can afford, whenever we can”, subject to  Dividend Policy maintaining strong capital ratios 42.3% 3
  5. 5. FY2012: Key Financial Ratios Key performance metrics are improving in right direction FY12 FY11 ChangeProfitability/ Efficiency Ratio  Achieved ROE of 13.6%.Return on Equity 13.6% 13.0% +0.6%  Driven mainly by expansion in non-Return on Assets 1.3% 1.2% +0.1% interest income ratio to 26.8%; andNon-Interest Income Ratio 26.8% 20.8% +6.0%  Drop in cost-to-income ratio to 47.3% due better cost management.Cost-to-Income Ratio 47.3% 48.3% +1.0%  Gross impaired loans ratio dropped toAsset Quality 2.4% and loan loss coverage raised toGross Impaired Loans 2.4% 3.3% +0.9% 108.5%, better than industry average.Loan Loss Coverage Ratio 108.5% 90.1% +18.4%  Flexibility to expand balance sheet, with:Liquidity & Capital Ratio  15.2% RWCRCASA Ratio 33.7% 34.0% - 0.3%  77.8% loans to deposits ratioLoan to Deposit Ratio 77.8% 78.8% +1.0%  Stable CASA ratio at 33.7%Risk Weighted Capital Ratio 15.2% 16.1% - 0.87%Core Capital Ratio 11.5% 11.9% - 0.43% 4
  6. 6. Summarised Income Statement FY2012: Net Profit After Taxation Rose 17.3% to RM479.8 mil Change  17.3% increase in net profits driven FY12 FY11 RM mil RM mil by growth in: RM mil %  Net interest income due to 11.3%Net Interest & Islamic expansion in loans, but offset 930.2 903.0 27.2 +3.0%Banking Income with margin compression andNon-Interest Income 320.2 225.7 94.5 +41.8% rise in cost of funds.  Non-interest income due toNet Income 1,250.4 1,128.7 121.7 +10.8% recurring transactionOperating Expenses 591.8 544.9 46.9 +8.6% banking, treasury sales and wealth management.Operating Profit 658.6 583.8 74.8 +12.8%  Write back in impairment provisions due to RM23.1 millionAllowance for losses on of CLO recoveries.loans, advances and -34.6 -33.3 -1.3 +3.9%financing and other losses Offset by:  8.6% rise in operating expensesWrite back of impairment 21.6 4.1 17.5 +426.8% in line with business expansion.Pre-tax profit 643.6 553.1 90.5 +16.4%  Higher collective impairment provisions due to acceleration inNet Profit After Taxation 479.8 409.2 70.6 +17.3% gross loans growth to 11.3%, from 4.8% in FY2011. 5
  7. 7. Summarised Balance Sheet FY2012: Total assets expanded 9.8% to RM39.6 billion, driven by acceleration in loans growth Change FY12 FY11 RM bil RM bil RM bil %Net Loans, Advances  Total assets expanded by 9.8% to 24.4 21.8 2.6 +11.8% RM39.6 billion.and Financing  Double-digit net loans growth ofInvestment and 11.4 12.1 0.7 -6.0% 11.8% to RM24.4 bilion, driven byDealing Securities Consumer and Business Banking.Deposits from  Healthy liquidity with customer 32.1 28.3 3.8 +13.4%Customers deposits expanding by RM3.8 billion or 13.4%.Total Assets 39.6 36.1 3.5 +9.8%  Shareholders’ funds increased by 9.5%.Shareholders’ Funds 3.7 3.4 0.3 +9.5% 6
  8. 8. Key Financial Trends Financial Performance is improving, with Key Metrics in Right Direction Profit After Tax Profit After Tax Non-Interest Income RatioRM mil 479.8 Non-Interest Income ratio 27%450 26.1% 26.8%400 409.2 25% 380.1350 301.5 23%300 21% 22.4% 22.4%250 228.9 20.8%200 19% FY2008 FY2009 FY2010 FY2011 FY2012 FY2008 FY2009 FY2010 FY2011 FY2012 Return On Equity Return on Equity Cost-to-IncomeRatio Cost To Income Ratio 16.8%17% 13.6% 53% 53.0% 52.1%13% 13.0% 49% 9% 8.6% 10.5% 48.3% 46.2% 47.3% 5% 45% FY2008 FY2009 FY2010 FY2011 FY2012 FY2008 FY2009 FY2010 FY2011 FY2012 7
  9. 9. Alliance Bank Group TodayThe Bank remains strong and well-positioned.• Clear niche position in Consumer and Business Banking.• Well-capitalised, with strong asset quality.• Continued focus on strengthening risk management capabilities.Achieving continued growth.• Clear strategy focused on building sustainable long-term growth.• Leverage on all our business franchises to drive non-interest income activities.• Launched new initiatives such as Transaction banking, Treasury sales, Bancassurance and Wealth Management.Clear strategy and the right team to deliver it. • Improving customer service, cross-selling, productivity and reducing turn around times. remains a major priority. • Impactful investment in our IT and infrastructure. • Focus on human capital with right values. 8
  10. 10. Corporate Developments Growing Non-Interest Income: 8-Year Bancassuranc Arrangement with AIAOur Objectives Initiatives Strategic January 2011 Partnership  Established Takaful joint venture One-stop financial with AIA services center for Product Development Distribution channels customers’ convenience – both March 2012 banking and insurance products  Formalized an 8-year arrangement with AIA Broad suite of products to meet March 2012 market, customer and  Launched Premier Income 5 (“PI5”) channel needs  Maximises savings potential What Does AIA Provide?  Provides protection to subscribers Provide financial  Highly experienced in multi-channel solutions that distribution, including in-branch maximise savings The opportunities ahead sales, direct marketing, and tele potential and provides Innovative & high-value products for: marketing, worksite marketing, cross- protection to the  Protection referrals, brokers and mobile sales team customers  Savings / Investments  Medical / Health  Strong product development capabilities  Retirement 9
  11. 11. FY2013: Business Focus The FY2013 Business Plans will focus on… Our Aspirations How? Who?A Consumer Generate recurring revenue from existing & Bkg To Build “Predictable & new business opportunities Sustainable Financial Performance” SME Bkg Building infrastructure and the Alliance brand Investment Bkg WholesaleB Bkg Delivering excellent customer service and To Build “Best Customer experience Service Bank” Islamic Bkg Financial Enhancing cost efficiency and productivity MarketsC Asset Mgt. To Develop “Engaged Employees with Right Reinforcing the right values & rewarding Strategic Action Values” performance Plans by Each LOB 10
  12. 12. Enhance Shareholder Value Drive high productivity with effective cost management DIFFERENTIATION ENABLERS Alliance Bank PRODUCT IT PEOPLEBRANDING CHANNELS SERVICE INNOVATION INFRASTRUCTURE & TRAINING CUSTOMER LOYALTY BUSINESS IMPROVED MARGINS & RETENTION LEADERSHIP ENHANCE SHAREHOLDER VALUE 11
  13. 13. Contents1 Executive Summary2 Financial Results for FY2012 12
  14. 14. Net Interest Income Sustainable Interest income and margin Net Interest Income Trend NIM and Cost of Funds Trend RM mil700.00 Net Interest Income NIM Cost of Funds 670.3 673.9 3.5% 654.6650.00 3.0% 2.8% 2.7% 2.7%600.00 585.5 2.5% 2.5% 2.5% 2.1%550.00 2.3% 2.0% 1.9%500.00 1.5% FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012 Q4FY12 vs Q4FY11 Q4FY11 vs Q4FY10  Interest income increased by RM3.6 mil (0.5%) y-o-y, and +RM3.8 mil +RM4.3 mil RM4.6 mil (2.9%) q-o-q. + 2.4% + 2.8%  Net interest margin (“NIM”) contracted by 20 bps to 2.5% in FY2012, due to rise in cost of funds – follow through FY12 vs FY11 FY11 vs FY10 impact of OPR revision in 2010 and increase in SRR. + RM3.6 mil + RM84.8 mil + 0.5% + 14.5% 13
  15. 15. Non-Interest Income Non Interest Income gaining momentum Non-Interest Income Trend FY2012 Growth Non Interest Income NII/ Total Income RM mil Commission Fee Income Investment Income400.0 30.0% 26.8% Forex Gain Other Income 350 25.0% 18.5350.0 22.4% 22.4% 300 8.0 20.8% 20.0% 250 320.2 117.0300.0 15.2 200 7.4 +108.9% 15.0% 56.0250.0 150 10.0% 235.0 +8.5% 121.6 233.2 225.7 100200.0 112.1 5.0% 50 +57.7% 55.2150.0 0.0% 35.0 0 FY2009 FY2010 FY2011 FY2012 FY11 FY12 Q4FY12 vs Q4FY11 Q4FY11 vs Q4FY10  Non-Interest Income growth of RM36.2 mil (69.4%) q-o-q + RM36.2m + RM1.2m and RM 94.5 mil (41.8%) y-o-y. + 69.4% + 2.4% FY11 vs FY10  The Non-Interest Income growth was mainly from an FY12 vs FY11 - RM7.4m increase in treasury trading activities, foreign exchange + RM94.5m -3.2% gain, commission from sale of wealth management + 41.8% products, and trade bills. 14
  16. 16. Operating Expenses Cost-to-income (“CIR”) ratio declined further to 47.3%, from 48.3% a year ago Operating expenses trend Operating expenses breakdownRM mil Operating expenses CIR 800.0 60.0 FY12 FY11 53.0 52.1 Total700.0 48.3 47.3 Overhead +8.6% 50.0 Expenses600.0 Personnel 591.8 40.0 Costs +12.8%500.0 559.4 544.9 554.6 30.0 Establishment400.0 Costs +3.9% 20.0300.0 Marketing Expenses +11.0% 10.0200.0 Admin & General -6.2%100.0 0.0 Expenses FY2009 FY2010 FY2011 FY2012 0 200 400 600 800 Q4FY12 vs Q4FY11 Q4FY11 vs Q4FY10 +RM10.3 mil RM7.6 mil  Cost growth moderated to 8.6%. Increase mainly from + 7.0% + 5.5% personnel expenses as we continue to invest in human capital and IT infrastructure to support the business growth. FY12 vs FY11 FY11 vs FY10 + RM46.9 mil - RM9.7 mil + 8.6% -1.7% 15
  17. 17. Impairment Provisions Net charge for loan provisions dropped to RM13.0 million Loan loss allowances and write-back of impairmentRM mil FY09 FY10 FY11 FY12 200.0 192.0 RM mil RM mil RM mil RM mil150.0 (Allowances for)/ write-back of 100.9 losses on loans, -115.1 31.9 -33.3 -34.6100.0 advances and financing, and other losses 50.0 29.2 13.0 Write-back of/ (allowance for) -76.9 -132.8 4.1 21.6 0.0 impairment FY2009 FY2010 FY2011 FY2012 Q4FY12 vs Q4FY11 Q4FY11 vs Q4FY10  Impairment provision set aside of RM34.6 million (FY2011: -RM4.8 mil +RM23.1 mil RM33.3 million), due to expansion in loans portfolio by 11.3% - 57.3% +73.3% (FY2011: 4.8%).  Total impairment provision write back of RM23.1 mil from the FY12 vs FY11 FY11 vs FY10 CLO recoveries. - RM16.2 mil - RM71.7 mil - 55.5% -71.0% 16
  18. 18. Net Profit After Taxation FY2012: Net Profit After Taxation up 17.3% Net Profit After Tax NPAT and EPS by entitiesRM mil NPAT EPS 600 35 31.5 Legal 30 FY2012 FY2011 500 26.7 Entities 479.8 25 400 NPAT EPS NPAT EPS 19.7 409.2 20 RM mil sen RM mil sen 300 14.9 301.5 15 ABMB 484.3 81 415.4 70 200 228.9 10 AIS 72.6 24 56.1 19 100 5 AIBB 38.9 10.66 45.7 12.52 0 0 2009 2010 2011 2012 Q4FY12 vs Q4FY11 Q4FY11 vs Q4FY10  17.3% Y-o-Y growth over FY2011 to RM479.8 mil. +RM 22.7 mil + RM7.7 mil  26.7% growth over 4th Quarter FY2011. + 26.7% + 9.9%  Earnings per share rose to 31.5 sen in FY2012, compared with 26.7 sen, a year ago. FY12 vs FY11 FY11 vs FY10 + RM70.6 mil + RM107.7 mil + 17.3% +35.7% 17
  19. 19. Enhance Shareholder Value 42.3% of Net Profits declared as Dividends – Payout Ratio on the rise % Return on Equity (Net Profit After Tax) % Return on Equity (Pre-Tax Profit) 20.0 13.6 17.6 18.3 14 13.0 18.0 16.0 14.3 12 10.5 14.0 10 12.0 11.3 8.6 10.0 8 8.0 6 6.0 FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012 Dividend payout ratio Earnings per share (sen) %45.00 41.9 42.3 35 31.540.00 3035.00 32.5 26.730.00 25 26.225.00 19.7 2020.00 14.9 1515.0010.00 10 FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012 18
  20. 20. Customer Deposits 13.4% Growth in Customer Deposits, with CASA ratio at 33.8% Composition of customer deposits RM bil Customer deposits Trend FY2012 Negotiable35.0 Structured instruments of deposits, deposits 4.4% 0.6%30.0 32.1 Money market 398.6 deposits25.0 28.3 12.7% Demand deposits 25.6 28.5%20.0 23.615.0 107.3 108.910.0 Saving deposits Fixed/ 5.3% investment 5.0 deposits 48.5% 0.0 FY2009 FY2010 FY2011 FY2012  Deposit growth of RM3.8 billion or 13.4%. FY2012 growth FY2011 growth  Fixed deposits at RM15.6 billion, accounted for 48.5% + RM3.8 bil + RM4.7 bil of total deposits. + 13.4% + 19.9% 19
  21. 21. Liquidity Liquidity remains strong, with CASA ratio at 33.7% , and Loan-to-deposit ratio at 77.8% CASA trend Loan-to-deposit ratio trend RM bil NID FD DD SA CASA ratio FY2009 FY2010 FY2011 FY201245.0 45.0% 95.00% 41.5%40.0 40.0% 90.6% 90.00% 34.0%35.0 33.0% 35.0% 33.7%30.0 30.0% 85.00% 10.825.0 9.6 25.0% 8.4 80.00% 108.9 78.8%20.0 9.8 20.0% 76.40% 77.8%15.0 15.0% 75.00% 15.6 14.610.0 14.1 10.0% 12.2 70.00% 5.0 5.0% 0.0 0.0% 65.00% FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012  Demand deposits and saving deposit increased by 12.5%  Loan to deposit ratio remained healthy at 77.8% to RM10.8 bil in FY2012. (FY2012).  Fixed deposits increased by 7.0%.  Deposits growth momentum maintained with growth at 13.4% 20
  22. 22. Gross Loans Loans growth momentum has accelerated to 11.3%, highest growth rate in recent years Gross loans, Advances and Financing Trend Gross loans composition RM bil28.0 RM bil 28.0 Fixed rate Variable rate24.0 25.0 24.0 398.620.0 22.4 20.0 21.416.0 19.6 16.012.0 22.2 12.0 107.3 17.9 19.3 16.7 108.9 8.0 8.0 4.0 4.0 2.9 3.5 3.1 2.7 0.0 0.0 FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012  Gross loans, including Islamic financing, recorded a FY2012 growth FY2011 growth healthy double-digit growth of 11.3% to RM25.0 bil. + RM2.5 mil + RM1.0 mil + 11.3% + 4.8%  Variable rate loan account for 89.0% of total gross loans. 21
  23. 23. Composition of Loans Portfolio Diversified Loans Portfolio – 54% Consumer & 22% from SME Composition of loans by business segments Composition of loans by economic purposes FY2012 FY2012 Purchase of Others Purchase of securities Consumer SME Wholesale 5.6% 1.8% transport vehicles 2.3% 398.6 24.2% Purchase of 107.3 FY2011: residential Working 23.6% 108.9 property capital 25.3% 39.0% 3.5% y-o-y 12.4% y-o-y 53.9% FY2011: 21.9% 55.0% Purchase of FY2011: non- Construction, Personal use residential 21.3% 1.0% 8.6% property Credit card 13.4% 2.5% 17.9% y-o-y Purchase of other fixed assets 0.5% 11.3% growth in gross loans.  Housing loans account for 39.0% of total loans. Consumer Banking accounts for 53.9% of total gross  Housing loans expanded by RM1.1 billion or 12.4%. loans. 22
  24. 24. Asset QualityAsset quality continues to improve with disciplined approach in credit risk management and collection processes Gross impaired loans ratio (%) Loan loss coverage (%) 4.5 108.5 99.7 94.4 3.8 90.1 3.3 2.4 FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012  Gross impaired loans ratio had improved to 2.4%  The loan loss coverage had risen to 108.5% in in FY2012, from 3.3% in FY2011. line with loan growth.  The Group has set aside collective provisions under BNM’s transitional provision for FRS139 adoption. 23
  25. 25. Capital Capital ratios remained strong to meet Basel III requirements Risk Weighted Capital Ratio Capital Adequacy by Legal Entities 16.09% Legal Core Capital RWCR Entities 15.40% 15.22%14.65% ABMB 13.32% 13.76% AIS 11.52% 13.36% AIBB 56.65% 57.13%FY2009 FY2010 FY2011 FY2012 Core Capital Ratio  Group RWCR at 15.22% with Core Capital Ratio 11.95% at 11.52%. 11.52% 11.13%10.30%  RWCR ratios also in compliance with Basel III requirements.  Presently, only RM597.8 mil of capital is from Subordinated Bonds.FY2009 FY2010 FY2011 FY2012 24
  26. 26. THANK YOUDisclaimer: This presentation has been prepared by Alliance Financial Group (the “Company”) for information purposes only and does not purport to contain all theinformation that may be required to evaluate the Company or its financial position. No representation or warranty, expressed or implied, is given by or on behalf of theCompany as to the accuracy or completeness of the information or opinions contained in this presentation.This presentation does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of itform the basis of, or be relied in any connection with, any contract, investment decision or commitment whatsoever.The Company does not accept any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising inconnection therewith.For further information, please contact: Alliance Financial Group Amarjeet Kaur Eric Lee 7th Floor, Menara Multi-Purpose Group Corporate Strategy & Group Chief Financial Officer Capital Square Development Contact: (6)03-2730 2388 No. 8, Jalan Munshi Abdullah Contact: (6)03-2034 4386 Email: ericlee@alliancefg.com 50100 Kuala Lumpur, Malaysia Email: amarjeet@alliancefg.com Tel: (6)03-2730 2300 www.alliancegroup.com.my/quarterlyresults.html 25

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