ANALYST BRIEFING
9M FY2014
13 February 2014
Contents

1

Executive Summary

2

Strategic Focus & Priorities

3

Financial Results for 9MFY2014
The Alliance Financial
Group Today
We have Built a Strong Franchise in Consumer & SME Banking

 Clear niche in Consumer &...
Progress:
Medium Term Targets
9MFY14: Good Progress Against Our 3-Year Medium Term Targets FY2012 – FY2015
Alliance Financ...
Summarised
Income Statement
Sustainable & Consistent Financial Performance: 6.7% Operating Profit Growth
Change (y-o-y)
In...
Summarised
Balanced Sheet
Net Loans Growth at 13.2% Y-o-Y, Driven By Consumer Lending

Balance Sheet
Total Assets

Change
...
Key Financial Ratios
Financial Ratios

-0.2%

1.2%

1.3%

-0.1%

Earnings per Share

26.7 sen

26.2 sen

+1.9%

Interim Di...
Trend:
Key Financial Ratios
Sustained Financial Performance, with Key Metrics in the Right Direction
Return on Equity

Non...
Contents

1

Executive Summary

2

Strategic Focus & Priorities

3

Financial Results for 9MFY2014
Strategic Priorities
Continue To “Deliver Consistent and Sustainable Financial Performance”
Our Priorities

 Build on str...
Contents

1

Executive Summary

2

Strategic Focus & Priorities

3

Financial Results for 9MFY2014
Net Income
Steady Growth in Net Income Driven by Higher Loans Growth


Net Income Trend
RM mil
1200

Net income for 9MFY1...
Net Interest Margin
Net Interest Margin Continues To Be Under Pressure


3.0%

NIM

2.7%

2.7%
2.5%

2.5%

Net Interest M...
Non-Interest Income
Non-Interest Income Gaining Momentum
Non-Interest Income
RM mil

Other Income
Fee Income
NII Ratio

40...
Operating Expenses
Cost-to-income Ratio improved to 45.9%
Composition of operating expenses
9MFY13
9MFY14

Operating expen...
Gross Loans
Net Loans Growth Momentum at 13.2% Y-o-Y, Driven By Consumer Lending
Loans Composition by Business Segments

N...
Loans Growth:
Residential & Commercial
Maintained Double-digit Growth Y-o-Y for Residential & Commercial Properties
RM bil...
Loans Growth:
SME & Transport Vehicles
Lending for SMEs 8.3% Y-o-Y; Resumed Growth in Hire Purchase
RM bil
10.0

5.0%

Loa...
Composition
of Loans Portfolio
Well Diversified & Secured Loans Portfolio
Loans Composition by Economic Purposes
9MFY13

9...
Asset Quality
Continued Improvement In Asset Quality – Net Impaired Loans Ratio at 0.8%
Net Impaired Loans Ratio

Gross Im...
Asset Quality:
Mortgages, Hire Purchase, SME
Continued Improvement in Asset Quality for Mortgages, Hire Purchase and SME s...
Impairment Provisions
Credit Charge at ~ 1.3 bps
RM mil

Net (Write-back) / Allowance of losses on
Loans & Financing and I...
Balance Sheet
Management
Effective Utilisation of Balance Sheet: Net Loans Constitute 65.3% of Total Assets
Composition of...
Customer Deposits
Robust Y-o-Y Deposit Growth of 17.1%, With CASA Deposits Up 7.5% to RM12.9 billion
CASA Trend

Customer ...
Customer Deposits
Strong Liquidity Position with Loans to Deposits Ratio at 83.6%
Deposits Composition by Customer Type

(...
Effective Capital
Management
Basel III: Capital Adequacy Ratios by Legal Entities
Total Capital Ratio
18%

Legal Entities
...
Enhanced
Shareholder Value
Return on Equity at 13.4%, with Consistent Growth in Earnings Per Share
Profit Before Tax

RM m...
Enhanced
Shareholder Value
9MFY14: Steady improvement in Market Capitalisation and Share Price performance
Market Capitali...
THANK YOU
Disclaimer: This presentation has been prepared by Alliance Financial Group (the “Company”) for information purp...
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9M FY2014 Results Analyst Briefing as at 31 December 2013 from Alliance Financial Group Berhad.

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This is the Analyst Briefing for 9M FY2014 Results as at 31 December 2013 from Alliance Financial Group Berhad.

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9M FY2014 Results Analyst Briefing as at 31 December 2013 from Alliance Financial Group Berhad.

  1. 1. ANALYST BRIEFING 9M FY2014 13 February 2014
  2. 2. Contents 1 Executive Summary 2 Strategic Focus & Priorities 3 Financial Results for 9MFY2014
  3. 3. The Alliance Financial Group Today We have Built a Strong Franchise in Consumer & SME Banking  Clear niche in Consumer & SME Banking: Build Consistent & Sustainable Financial Performance  Increasing market share in target segments with year-on-year net loans growth of 13.2%, faster than industry  Winning market recognition  Focused on building sustainable long term revenue growth:  Accelerated non-interest income activities Aspirations Develop Engaged Employees with Right Values Deliver Superior Customer Service Experience  Sustainable CASA ratio at 35.2%  0.8% net impaired loans ratio  14.4% total capital ratio  Dividend policy to pay up to 50% of net profits 2
  4. 4. Progress: Medium Term Targets 9MFY14: Good Progress Against Our 3-Year Medium Term Targets FY2012 – FY2015 Alliance Financial Group Asset Quality FY2011 9MFY14 1.9% 0.8% 20.8% 28.0% … net impaired loans to be better than industry average Non-Interest Income Ratio … to increase non-interest income to 30% of total revenue Cost to Income Ratio … move to industry average (45%-48%) through: • targeted revenue growth • improved productivity 48.3% 45.9% Return on Equity … achieve industry average (14%-16%) through: • focus on underlying earnings momentum • effective capital management 12.8% 13.4% Dividend Dividend Policy Policy … pay up to 50% of net profits after tax, subject to regulatory approvals and strong capital ratios 26.2% (Interim 3.3 sen) ~ 50% (Interim 19.0 sen) 3
  5. 5. Summarised Income Statement Sustainable & Consistent Financial Performance: 6.7% Operating Profit Growth Change (y-o-y) Income Statement 9MFY14 RM mil 9MFY13 RM mil RM mil % Net Interest Income 577.6 543.0 34.6 6.4 Islamic Banking Income 158.4 184.9 -26.5 -14.4 Non-Interest Income 271.6 250.1 21.5 8.6 1,007.6 978.0 29.6 3.0 462.9 467.6 -4.7 -1.0 Net Income Operating Expenses Pre-Provision Operating Profit (Allowance for)/ Write-back of losses on loans & financing and other losses Pre-tax profit Net Profit After Taxation 544.7 510.4 34.3 6.7 -3.1 29.2 -32.2 > -100 541.6 535.7^ 5.9 1.1 405.5 399.3 6.2 ^FY2013 includes share of results of associate – loss of RM3.9 million from AIA-AFG Takaful, which was disposed in FY2013 1.6  +6.4% rise in net interest income from 13.2% net loans growth, but interest margins remain under pressure.  +8.6% growth in non-interest income, contributed by:  Recurring income from transaction banking, wealth management and brokerage activities.  One-off sign-on fee from bancassurance arrangement amounting to RM30 million.  However, investment income from Financial Markets registered RM25.8 million y-o-y drop due to steepening of the yield curves.  -1.0% decrease marginally in overhead expenses, despite one-off staff rationalisation cost of ~RM22.3 million incurred in June quarter.  Provision charge of RM3.1 million due to strong loans growth, as compared to net write-back of RM29.2 million last year. 4
  6. 6. Summarised Balanced Sheet Net Loans Growth at 13.2% Y-o-Y, Driven By Consumer Lending Balance Sheet Total Assets Change 9MFY14 RM bil 9MFY13 RM bil RM bil % 46.3 40.6 5.7 14.3 Treasury Assets 12.6 10.6 2.0 18.8 Net Loans 30.3 26.7 3.6 13.2 Customer Deposits 36.7 31.3 5.4 17.1 CASA Deposits 12.9 12.0 0.9 7.5 Shareholders’ Funds 4.0 4.1 -0.1 13.2% 12.9% - 0.3% Customer Deposits Growth (y-o-y) 17.1% 2.2% -  +17.1% y-o-y customer deposits growth, keeping pace with loans expansion to maintain healthy loans to deposit ratio. -2.4 Net Loans Growth (y-o-y)  +13.2% y-o-y net loans growth: above industry targeting profitable Consumer and SME segments. 14.9%  +7.5% y-o-y growth in CASA deposits, contributing to 35.2% of total deposits. Note: Treasury assets comprise financial assets (HFT, AFS & HTM), derivative financial assets & placements with Financial Institutions 5
  7. 7. Key Financial Ratios Financial Ratios -0.2% 1.2% 1.3% -0.1% Earnings per Share 26.7 sen 26.2 sen +1.9% Interim Dividends per Share 19.0 sen 16.6 sen +14.5% RM2.60 RM2.62 -RM0.02 Non-Interest Income Ratio 28.0% 27.2% +0.8% 45.9% 47.8% -1.9% Gross Impaired Loans Ratio 1.5% 2.1% -0.6% Net Impaired Loans Ratio 0.8% 1.2% -0.4% Loan Loss Coverage Ratio Capital 13.6% Cost-to-Income Ratio Liquidity 13.4% Net Assets per Share Asset Quality Change Return on Assets Efficiency 9MFY13 Return on Equity Shareholder Value 9MFY14 91.2% 83.8% +7.4% Loans to Deposit Ratio 83.6% 86.7% -3.1% CASA Ratio 35.2% 38.3% -3.1% Common Equity Tier 1 Capital Ratio 10.44% - n/a Tier 1 Capital Ratio 11.81% 11.88% -0.07% Total Capital Ratio 14.38% 14.88% -0.50%  Non-interest income – improving steadily each year with focus on building recurring fee income.  Cost-to-income ratio – continued improvement due to effective cost management.  Loan Loss Coverage – improved to 91.2% due to higher recoveries of impaired loans.  Loans to deposits ratio – maintaining strong liquidity position with acceleration of deposit growth.  CASA ratio – sustained at 35.2% despite 17.1% overall deposits growth.  Interim dividends declared of 19.0 sen YTD:  1st interim dividend of 7.5 sen  2nd interim dividend of 11.5 sen  Strong capitalisation under Basel III. 6
  8. 8. Trend: Key Financial Ratios Sustained Financial Performance, with Key Metrics in the Right Direction Return on Equity Non-Interest Income Ratio 35% 15% 12.8% 14.0% 13.8% 13.4% 28.0% 30% 25% 10% 20% 10.5% 15% 5% 27.0% 22.4% 28.7% 20.8% 10% 5% 0% 0% FY2010 FY2011 FY2012 FY2013 9MFY14 FY2010 CASA Ratio FY2011 FY2012 FY2013 9MFY14 Cost-to-Income Ratio 45% 54% 52% 41.5% 40% 52.1% 50% 34.0% 35% 35.2% 33.7% 48.3% 48% 47.6% 47.9% 45.9% 33.6% 46% 44% 30% FY2010 FY2011 FY2012 FY2013 9MFY14 42% FY2010 FY2011 FY2012 FY2013 9MFY14 7
  9. 9. Contents 1 Executive Summary 2 Strategic Focus & Priorities 3 Financial Results for 9MFY2014
  10. 10. Strategic Priorities Continue To “Deliver Consistent and Sustainable Financial Performance” Our Priorities  Build on strengths and niche in Consumer and Business Banking Build Consistent & Sustainable Financial Performance  Enhance existing branch network and leverage on alternate channels  Enhance customer service through streamlining of processes and raising staff productivity Aspiration Develop Engaged Employees with Right Values Deliver Superior Customer Service Experience  Improve efficiency in resource utilisation, ensuring impactful investments in technology and infrastructure  Strengthen investment banking and Islamic banking capabilities … We will continue to exercise caution & implement vigilant risk management to deliver consistent & sustainable results… 9
  11. 11. Contents 1 Executive Summary 2 Strategic Focus & Priorities 3 Financial Results for 9MFY2014
  12. 12. Net Income Steady Growth in Net Income Driven by Higher Loans Growth  Net Income Trend RM mil 1200 Net income for 9MFY14 grew RM29.6 million or 3.0% year-on-year (y-o-y), driven by:  Net interest income growth of RM34.6 million or 6.4% y-o-y 978.0 1000 1,007.6 930.4 858.2  +RM114.4 million increase in interest income primarily from loans growth; but offset by  +RM79.8 million rise in interest expense from 17.1% y-o-y expansion in deposits and stiffer competition for deposits. 787.0 800  Net income from Islamic Banking contracted by RM26.5 million or 14.4% mainly due to the run-off of high-yield Co-op personal financing. 600 9MFY10 9MFY11 9MFY12 9MFY13 9MFY14 vs 9MFY13 + RM 29.6mil + 3.0% 9MFY14  Non-interest income grew by RM21.5 million or 8.6% due to expansion of recurring fee income activities, but offset by lower investment income from Financial Markets. 11
  13. 13. Net Interest Margin Net Interest Margin Continues To Be Under Pressure  3.0% NIM 2.7% 2.7% 2.5% 2.5% Net Interest Margin (NIM) was 2.26% for 9MFY14, down 15 bps since Mar 2013  NIM Trend Continuing margin compression due to:  Run-off from repayments of higher yielding loans: 2.4%  Co-op loans continue to run down: 2.3% • RM442.0 million as at Dec 2013 • RM565.0 million as at Dec 2012 • RM1,023.1 million as at Mar 2011 2.0%  New mortgage loans are at lower yield 1.5% FY2010 FY2011 FY2012 FY2013  Housing loans as a % of total Loans: 9MFY14 • 41.9% as at Dec 2013 • 40.8% as at Dec 2012 • 37.1% as at Mar 2011 Cost of Funds Trend 3.0% COF 2.5% 2.3% 2.3%  Intensified competition for fixed deposits 2.3% 2.0%  Cost of Funds (COF) has stabilised at 2.3%, as interest cost has been supported by sustained CASA deposits.  2.1% However, margin compression expected to continue due to intensified competition for lending activities. 1.9% 1.5% FY2010 FY2011 FY2012 FY2013 9MFY14 12
  14. 14. Non-Interest Income Non-Interest Income Gaining Momentum Non-Interest Income RM mil Other Income Fee Income NII Ratio 400 26.3% 300 182.2 30%  Recurring income from transaction banking, wealth management, treasury and brokerage activities Mix 20% 40.1 14.7%  Brokerage income increased by RM4.2 million 22.6%  Forex gain increased by RM12.9 million 32.7 44.2 98.8 87.2 10% 109.6 100 92.5  Commission income increased by RM4.6 million 61.4 15.6 42.5 250.1 173.5 24.2 28.0% 271.6 12.7 0 27.2% 20.4% 21.0% 231.7 200  Non-interest income (NII) in 9MFY14 increased by RM21.5 million or 8.6%, mainly contributed by: Investment Income Commission 79.9 87.3 23.0 26.4 40.3 9MFY10 9MFY11 9MFY12 40.4% 60.5 22.3% 74.3 55.9 offset by: 0% 9MFY13 9MFY14 vs 9MFY13 + RM21.5m + 8.6% 9MFY14  One-off sign-on fee income in respect of a bancassurance arrangement of RM30 million.  Lower investment income by RM25.8 million compared to 9MFY13 due to steepening of yield curves:  Lower gain from sale of Available-For-Sale investments 13
  15. 15. Operating Expenses Cost-to-income Ratio improved to 45.9% Composition of operating expenses 9MFY13 9MFY14 Operating expenses trend RM mil 800 OPEX % 60% CIR 52.9% 46.4% 46.8% 47.8% 45.9% 50% 462.9 Marketing 3.0% Admin 8.7% Marketing 2.9% Admin 8.0% 40% 600 415.9 398.6 435.2 467.6 400 30% Establishment 23.3% Personnel 65.0% Establishment 23.7% Personnel 65.4% 20% 200 10% 0 9MFY13 RM mil RM % Personnel 300.7 305.9 -5.2 -1.7 Establishment 107.9 110.4 -2.5 -2.3 Marketing 14.0 13.8 0.2 1.4 Administration 40.3 37.5 2.8 7.5 0% 9MFY10 9MFY11 9MFY12 9MFY13 9MFY14 vs 9MFY13 - RM4.7 mil - 1.0% 9MFY14 Change 9MFY14 RM mil OPEX Contribution  Operating expenses reduced, contributed by effective cost management as the Group continues to invest in IT infrastructure as well.  Personnel cost remains the main operating cost. Excluding one-off staff rationalisation expense of RM22.3 million incurred in 1st Quarter, personnel cost constitutes approximately 63% of total OPEX. 14
  16. 16. Gross Loans Net Loans Growth Momentum at 13.2% Y-o-Y, Driven By Consumer Lending Loans Composition by Business Segments Net loans, Advances and Financing Trend RM bil Consumer 35 27.8 30 30.3 SME Wholesale 100% 20.7 21.9 24.2% 22.9% 22.0% 20.5% 24.5 23.7% 21.3% 21.9% 21.4% 20.2% 56.8% 25 22.7% 55.0% 53.9% 55.7% 57.8% FY2010 FY2011 FY2012 FY2013 9MFY14 80% 60% 20 15 40% 10 20% 5 0% 0 FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 + RM3.6 bil + 13.2%  Net loans growth of 13.2%, higher than industry loans growth  Balanced loans composition with 57.8% Consumer; 20.2% SME and 22.0% for Wholesale Lending  Effective management of interest rate risk: 10.7% of loan book is fixed rate (9MFY13: 9.6%) 15
  17. 17. Loans Growth: Residential & Commercial Maintained Double-digit Growth Y-o-Y for Residential & Commercial Properties RM bil 18.0 16.0 Loans Growth for Residential Property 18.9% 12.4% 8.8% 11.6 12.0 10.0 8.4 8.7 RM bil 8.0 17.9% 20% 6.1% 7.0 3.3% 14.0 15.9% Loans Growth for Commercial Property 12.8 22.2% 10% -2.3% 10% 6.0 0% 5.0 9.8 -10% 8.0 30% 11.0% -20% 6.0 4.4 4.0 3.0 -30% -40% -50% -50% 1.0 0.0 2.8 -30% 2.0 2.0 2.7 3.7 3.4 -10% 0.0 4.0 FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 + RM1.8 bil + 15.9% -70% -90% FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 + RM0.8 bil + 22.2%  Residential properties:+ RM1.8 billion or 15.9% y-o-y growth, higher than industry growth rate of 12.9%  Commercial properties:+ RM0.8 billion or 22.2% y-o-y growth  Focus on high growth areas i.e. Klang Valley, Penang and Johor, with attractive housing loan packages for the right customer segments, and business premises financing for SMEs 16
  18. 18. Loans Growth: SME & Transport Vehicles Lending for SMEs 8.3% Y-o-Y; Resumed Growth in Hire Purchase RM bil 10.0 5.0% Loans Growth for SME 14.4% 8.9% 6.8% RM mil 20% 8.3% 0% 8.0 6.0 4.4 5.5 4.8 5.8 6.2 Loans Growth for Transport Vehicles 1500 1200 900 1038.7 907.6 561.8 600 4.0 -40% 2.0 0.0 -60% FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 + RM0.5 bil + 8.3% 737.9 704.2 -20% 300 0 FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 + RM0.4 bil +57%  SME Lending: + RM 0.5 billion or 8.3% y-o-y loans growth, with flow-through impact of ETP Projects.  Corporate loans – major loan repayment in December 2013 affected y-o-y growth. (RM’mil) 9MFY13 9MFY14 Y-o-Y Growth SME 5,707 6,179 5,135 5,221  +RM377 million y-o-y growth with continued expansion of panel of car dealers and distributors. 8.3% Corporate & Commercial  Re-commenced Hire Purchase financing in April 2012, focusing on new and non-national marques. 1.7% 17
  19. 19. Composition of Loans Portfolio Well Diversified & Secured Loans Portfolio Loans Composition by Economic Purposes 9MFY13 9MFY14 Purchase of residential property 41.9% Others 8.1% Purchase of transport vehicles 3.4% Purchase of securities 4.9% Credit card 2.0% Purchase of nonresidential property 14.3% Working capital 18.9% Personal use 6.5% Purchase of residential property 40.8% Others 8.6% Purchase of transport vehicles 2.4% Purchase of nonresidential property 13.2% Purchase of securities 3.0% Credit card 2.3% Working capital 22.4% Personal use 7.3%  Risk Management – well diversified and collateralised loan book.  Residential and non-residential properties account for 56.2% of gross loans portfolio:  41.9% of loans portfolio is for residential properties, up from 40.8% as at 9MFY13  14.3% for non-residential properties  18.9% of gross loans are for working capital compared to 22.4% in 9MFY13. 18
  20. 20. Asset Quality Continued Improvement In Asset Quality – Net Impaired Loans Ratio at 0.8% Net Impaired Loans Ratio Gross Impaired Loans RM’mil Gross impaired loans 1400 % GIL Ratio 6.0% 2.5% 1200 3.8% 3.5% 4.0% 2.5% 1000 806.3 800 2.1% 2.0% 1.5% 1.8% 1.9% 2.0% 775.5 1.4% 1.5% 629.2 600 0.0% 579.2 469.0 1.1% 1.0% 0.8% -2.0% 400 0.5% -4.0% 200 0 -6.0% FY2010 FY2011 FY2012 9MFY14 vs 9MFY13 GIL: - RM103.7 mil -18.1% FY2013 9MFY14 9MFY14 vs 9MFY13 GIL Ratio:- 0.6% (from 2.1% Dec 2012) 0.0% FY2010 FY2011 FY2012 FY2013 9MFY14 9MFY14 vs 9MFY13 NIL Ratio:-0.4% (from 1.2% Dec 2012)  Net reduction in gross impaired loans of RM103.7 million y-o-y, despite a 12.8% y-o-y gross loans growth  Continue to refine credit origination processes, credit scoring models and intensify collection efforts 19
  21. 21. Asset Quality: Mortgages, Hire Purchase, SME Continued Improvement in Asset Quality for Mortgages, Hire Purchase and SME segment Purchase of Residential and non-residential Property Gross impaired loans Purchase of Transport Vehicles GIL Ratio RM’mil 600 400 1.5% 15 1.8% 3.0% 1.3% 301.9 266.7 282.4 RM’mil 400 0.8% 0.9% 14.0 1.0% 10 4.0% 242.2 204.0 9.2 9.0 1.0% -1.0% 5.7 -3.0% 3.0% 1.7% 146.2 5.6 5 2.7% 200 -2.0% 200 4.3% 300 0.0% 0.0% 6.0% 5.0% 2.0% 263.5 GIL Ratio 2.0% 1.0% 1.5% 336.4 Gross impaired loans 5.5% 3.0% 2.6% 2.0% 300 GIL Ratio RM’mil 20 3.0% 500 Gross impaired loans SME 1.3% 101.4 100 81.4 2.0% 1.0% 100 0.0% -4.0% 0 -1.0% FY2010 FY2011 FY2012 FY2013 9MFY14 0 -5.0% FY2010 FY2011 FY2012 FY2013 9MFY14 0 -1.0% FY2010 FY2011 FY2012 FY2013 9MFY14  The asset quality continued to improve, with the gross impaired loans ratio for the purchase of residential & nonresidential property declined to 1.5%. However, transport vehicles slightly increased to 0.9%.  Gross impaired loan ratio for SME segment further improved to 1.3%. 20
  22. 22. Impairment Provisions Credit Charge at ~ 1.3 bps RM mil Net (Write-back) / Allowance of losses on Loans & Financing and Impairment Charge Loan Loss Coverage 94.4% Write-back of Impairment 20 90.1% 82.5% Allowance for/ (write -back) of losses on loans and other losses 10 91.2% 87.7% 24.0 3.1 (29.2) 0 (0.5) (3.2) 4.0 (0.9) FY2010 (11.3) -10 FY2012 RM’000 FY2013 9MFY14 -30 9MFY11 9MFY12 9MFY13 9MFY14  Allowance in 9MFY14 is mainly due to higher collective assessment from loans growth and lower bad debts recovery.  For 9MFY14, credit cost was ~1.3bps.  CLO recoveries of RM0.9million for 9MFY14 as compared to RM0.5million in 9MFY13. 12,697 15,132 3,513 (37,769) (65,507) Bad debts written off 16.7 5,140 Bad debts recovered -20 9MFY13 Collective assessment (28.7) 9MFY14 Individual assessment 20.8 (5.4) Write-back FY2011 19,201 16,519 - (196) Allowance for other assets 2,248 4,237 Allowance for/(Write-back) of losses on loans and other losses 3,952 (28,737) Write-back of impairment (CLO) (902) (473) Total allowance/ (write-back) 3,050 (29,210) Write-back of commitments /contingencies 21
  23. 23. Balance Sheet Management Effective Utilisation of Balance Sheet: Net Loans Constitute 65.3% of Total Assets Composition of Total Assets Total Assets Trend RM bil Other Assets Treasury Assets 50 43.7 39.7 40 36.1 31.7 30 4.7 12.3 3.3 3.7 1.9 9MFY14 Net Loans 12.6 46.3 3.4 Cash, ST funds, Depo sits with FI 4.0% Other Assets 4.9% Cash, ST funds, Depos its with FI 3.3% Investment securities 25.9% Investment securities 23.1% 11.5 Net Loans 65.9% Net Loans 65.3% 20 20.7 9MFY13 12.6 6.3 10 Other Assets 7.6% 21.9 24.5 27.8 30.3 Composition of Total Liabilities/Equity Other 9MFY14 Liabilities 0 FY2010 FY2011 FY2012 FY2013 9MFY14 vs 9MFY13 + RM5.7bil + 14.3%  Total assets expanded by RM5.7 billion or 14.3% y-o-y to RM46.3 billion. 9MFY14 Shareholders' Funds 8.7% 3.4% Deposits of banks and other FIs 8.8% Deposits from customers 79.1% 9MFY13 Shareholders' Funds 10.0% Other Liabilities 4.3% Deposits of banks and other FIs 8.5% Deposits from customers 77.2% 22
  24. 24. Customer Deposits Robust Y-o-Y Deposit Growth of 17.1%, With CASA Deposits Up 7.5% to RM12.9 billion CASA Trend Customer Deposits Trend DD RM bil RM bil 45 36.0 35 32.2 28.4 36.7 6.8 6.2 17.1 17.6 1.7 32.2 35.2% 36.0 25 1.7 4.2 23.6 5.8 1.6 20 20 15 15 10 10 1.7 5 8.1 5 CASA ratio 33.6% 40 30 23.6 NID,MMD,SD 33.7% 34.0% 35 28.4 30 25 36.7 FD 41.5% 45 40 SA 15.6 14.6 12.2 1.7 1.6 9.8 8.0 9.6 9.1 10.8 10.4 12.1 11.2 0 0 FY2010 FY2011 FY2012 FY2013 9MFY14 vs 9MFY13 + RM5.4 bil + 17.1% 9MFY14 FY2010 FY2011 FY2012 FY2013 40% 34% 28% 22% 16% 10% 4% -2% -8% -14% -20% -26% -32% -38% 12.9 -44% -50% 9MFY14  Total customer deposits of RM36.7 billion as at 9MFY14, up 17.1% from the same period last year.  CASA deposits expanded by RM0.9 billion or 7.5% y-o-y to RM12.9 billion in 9MFY14. 23
  25. 25. Customer Deposits Strong Liquidity Position with Loans to Deposits Ratio at 83.6% Deposits Composition by Customer Type (%) 100 Loans to Deposit Ratio Trend 90.6 78.8 80 77.7 78.4 Domestic financial institutions 6.7% 83.6 Others 8.6% Govt. & statutory bodies 6.4% 60 40 Individuals 45.4% Business enterprises 32.9% 20 Deposits Composition by Product Type 0 FY2010 FY2011 FY2012 FY2013 9MFY14  Loans to Deposit Ratio of 83.6% as at December 2013.  Our overall strategy is to eventually raise Loans to Deposit ratio closer to 85.0%:  for more efficient balance sheet management; and  to be in line with industry Negotiable instruments of deposits, 6. 6% Structured deposits, 0. 8% Money market deposits, 9. 4% Demand deposits, 30 .4% Saving deposits, 4. 7% Fixed/ investment deposits, 48 .1% 24
  26. 26. Effective Capital Management Basel III: Capital Adequacy Ratios by Legal Entities Total Capital Ratio 18% Legal Entities CET 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 17% 16% 15.40% 16.18% 15.13% 14.77% FY2012 FY2013 15% AFG 10.44% 11.81% 14.38% 14.38% 14% 13% ABMB 11.15% 12.48% 12.48% AIS 13.19% 13.19% 13.89% AIBB 96.37% 96.37% 96.40% Basel III Minimum regulatory capital adequacy ratio ^ 12% 11% 10% FY2010 RM’mil 4.5% 6.0% FY2011 FY10 FY11 FY12 FY13 9M FY14 97.5% 97.2% 98.7% 98.5% 98.4% 8.0% Double Leverage Ratio 9MFY14  Strong profit generation capacity to fund balance sheet expansion and targeted dividend payouts.  Continuous enhancement of capital usage by focusing on: • Less capital intensive lending activities – Consumer, Mortgage and SME lending • Non-interest income and fee based activities – Wealth Management and Transaction Banking • Improving asset quality  Capital adequacy ratios are well above Basel III requirements. ^ Based on the Basel III minimum capital ratios for calendar year 2015 25
  27. 27. Enhanced Shareholder Value Return on Equity at 13.4%, with Consistent Growth in Earnings Per Share Profit Before Tax RM mil 1,000 Net Profit After Tax RM mil 800 800 600 400 438.8 510.6 541.6 535.7 600 324.2 400 301.5 380.6 399.3 405.5 9MFY12 9MFY13 9MFY14 224.3 200 200 0 9MFY10 9MFY11 9MFY12 9MFY13 9MFY14 Return on Equity (After Tax) % 13.8 14 12 9MFY10 9MFY11 Earnings per share sen 16 14.1 0 50 13.6 13.4 40 10.5 30 10 20 8 21.2 24.9 26.2 26.7 9MFY12 9MFY13 9MFY14 10 6 14.6 0 9MFY10 9MFY11 9MFY12 9MFY13 9MFY14 9MFY10 9MFY11 26
  28. 28. Enhanced Shareholder Value 9MFY14: Steady improvement in Market Capitalisation and Share Price performance Market Capitalisation Share Price Performance RM’bil RM 6 7.369 8 6.811 4.76 5 4.40 3.89 6.022 4 6 4.458 4.907 3 2.88 3.17 4 2 2 1 0 0 FY2010 FY2011 FY2012 FY2013 9MFY14 FY2010 FY2011 FY2012 FY2013 9MFY14  Market capitalisation and share price performance is improving steadily, with CAGR at 15.4% since FY2010. 27
  29. 29. THANK YOU Disclaimer: This presentation has been prepared by Alliance Financial Group (the “Company”) for information purposes only and does not purport to contain all the information 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 the Company 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 it form 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 in connection therewith. For further information, please contact: Alliance Financial Group 7th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia Tel: (6)03-2604 3333 www.alliancefg.com/quarterlyresults Amarjeet Kaur Group Corporate Strategy & Development Contact: (6)03-2604 3386 Email: amarjeet@alliancefg.com Tan Hong Ian Corporate Strategy & Investor Relations Contact: (6)03-2604 3370 Email: tanhongian@alliancefg.com 28

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