KUALA LUMPUR (Nov 26)
The potential inclusion of new shareholders in Alliance Bank Malaysia Bhd (KL:ABMB) may lead to a reassessment of its stock price, according to CIMB Securities.
Media reports indicate that DBS has put forth an updated application to Bank Negara Malaysia, seeking to acquire up to 30% of Alliance Bank. CIMB suggests that the entrance of Singaporean banks could heighten competition, particularly in areas advantageous to DBS, like SME banking, digital solutions, and product innovation.
CIMB stated, “DBS’ entry into Alliance Banking opens the door for a possible re-rating, but this situation is still in the early stages and hinges on regulatory approvals and acquisition pricing.”
With DBS’s operational scale and expertise as a strategic partner, Alliance Bank could bolster its competitiveness in areas such as franchise depth, product development, digital innovation, and risk management.
Currently, Alliance Bank’s price-to-book ratio stands at 0.88x for FY2026, suggesting potential for its valuation to reach 1.0x PBV, which would value the shares at RM5.15 each.
A 1.0x PBV would align it more closely with other mid-cap banks like Hong Leong Bank Bhd (KL:HLBANK) at 1.1x PBV FY2026, AMMB Holdings Bhd (KL:AMBANK) at 0.9x PBV FY2026, and RHB Bank Bhd (KL:RHBBANK) at 0.86x PBV FY2026.
However, CIMB mentioned that much of Alliance’s growth prospects might already be reflected in the current pricing following a capital restructuring through a rights issue completed in July 2025. There are short-term risks due to possible asset quality degradation.
In a different note, Hong Leong Investment Bank (HLIB) remarked that news of potential mergers and acquisitions might drive Alliance Bank’s share price up again, especially after DBS adjusted its target stake to 30%.
HLIB has upgraded Alliance Bank to a ‘buy’ rating, pushing the evaluation base year to FY2027, and recalibrated the target price to RM5.10, based on a PBV of 0.95 times and a return on equity (ROE) of 9.6%.
HLIB noted, “This valuation exceeds +2x standard deviation (SD) compared to the sector’s five-year average, which is just over 0.86x. This premium is justifiable given that the company’s ROE is 1 percentage point higher than its previous five-year average while gaining loan market share from competitors.”
On the matter of domestic competition, CIMB observed that Malaysian banks have heavily invested in digital upgrades, automation, data analytics, and enhancing customer experiences over the last decade, making them competitive.
CIMB added, “These advancements bolster established banks’ competitiveness against regional players, yet their scale advantages and strong local ties remain solid in a relatively mature industry with high banking penetration.”
Furthermore, CIMB pointed out that Malaysia’s regulatory framework, which encourages disciplined pricing and prudent competition, may also restrict disruptive actions from new market entrants.
In financial performance, Alliance Bank reported a core net profit of RM206.6 million for the second quarter ending Sept 30, 2025, bringing the first-half profit to RM405.2 million, aligning well with forecasts from CIMB Securities and HLIB.
As of Wednesday, analysts had four “buy” ratings, one “add,” and three “hold” ratings, with target prices ranging from RM4.78 to RM5.30.
At the time of writing on Wednesday, Alliance Bank’s share price had increased by 8 sen or 1.7% to RM4.71, putting the group’s valuation at RM8.15 billion.
