[RAM] RAM Ratings upgrades Alliance Bank and Alliance Islamic to AA3

RAM Ratings has upgraded the financial institution ratings of Alliance Bank Malaysia Berhad (Alliance Bank or the Group) and Alliance Islamic Bank Berhad (Alliance Islamic) to AA₃/Stable/P1 from A₁/Positive/P1. The long-term ratings of the entities’ sukuk/debt facilities have also been upgraded with a stable outlook (Table 1).

These rating actions follow Alliance Bank’s positive rating outlook since last year and reflect the Group’s sound and resilient asset quality, solid position in small and medium enterprise (SME) lending, favourable funding profile and excellent net interest margins (NIMs).

Alliance Bank’s gross impaired loan (GIL) ratio was a lower 1.8% in March 2025 (end-March 2024: 2.1%, industry: 1.4%) due to proactive recovery action and an expanded loan base. The GIL ratio of the Group’s dominant SME segment stayed commendable at 1.9%, outperforming the industry average of 2.8% – testament to Alliance Bank’s deep understanding of SMEs, effective risk management and sound lending practices. The SME portfolio is primarily domestic-focused and well-collateralised, showing resilience even during the Covid-19 pandemic. The Group’s previous source of asset quality stress, the Alliance One Account portfolio (9% of loans), saw improved collections and has been strategically de-emphasised. We anticipate Alliance Bank’s asset quality will stay healthy, with any potential slippages to be well-contained.

As a result of its entrenched SME franchise and good relationship with business owners, the Group consistently maintains a high proportion of current and savings account (CASA) deposits (end-March 2025: 41%; industry: 34%) and a large share of individual deposits (42%). The sizeable CASA deposits share, coupled with a broad base of SME loans, contributes favourably to the Group’s NIM (FY Mar 2025: 2.51%), which ranks among the best in the industry. 

A rights issue completed in July 2025 lifted Alliance Bank’s common equity tier-1 capital ratio to a pro forma 13.3% (end-March 2025: 12.2%), providing room for further loan expansion. That said, the Group is expected to moderate loan growth this financial year to 8%-10% (FY Mar 2025: 12.0%), which, alongside earnings accretion, will help preserve capital.

Pre-tax profit rose 9% to RM993 mil in FY Mar 2025, driven by continued loan expansion. Under its four-year Acceler8 2027 strategy, Alliance Bank is striving to rebuild its consumer banking book while keeping the SME segment a core strength. Corporate banking services are being enhanced to offer a wider range of products to support businesses throughout their life cycles. The Group is also expanding its presence in high-growth regions outside Klang Valley, namely Johor, Penang and Sarawak.

The financial institution ratings of the Group’s core subsidiary, Alliance Islamic, are equated to Alliance Bank’s in view of its strategic importance to the Group.



 

Analytical contacts
Lee Yee Von
(603) 2708 8217
yeevon@ram.com.my

Wong Yin Ching, CFA
(603) 2708 8280
yinching@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my