3. Key
Messages
Charting through turbulent times
• FOMC – economic activity is leveling out and accommodative policy is here to stay
• Increasingly liberalized regulatory and operating environment
Well positioned to respond to market shifts
• 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
3
4. Charting Through
Turbulent Times
Charting Through Turbulent Times
1,600 30
Sub-prime & Related Crisis
②
④
1,500 ①③ ① Fannie Mae – write down, to raise capital
⑤ ⑥ 20 ② Bankcorp – loan defaults, to raise capital
1,400 ⑨
⑧ ⑦ ③ Merrill Lynch – write off, sells shares
⑩ ④ Citigroup – loss on credit costs, cut jobs
1,300 ⑪ 10
⑤ Bear Stearns boss Cayne resigns
⑫ ⑥ Citigroup – increases stock offering
1,200 Ⓒ
0 ⑦ Lehman cuts 130bn of assets
1,100 ⑧ Blackstone posts $251mn loss
⑨ Freddie Mac dips below $10 since 1992
1,000 -10 ⑩ JP Morgan takes $1.5bn hit in Jul08
Ⓐ ⑪ Morgan Stanley plans add layoffs
900
⑫ GE - FDIC backing for $139bn in debt
-20
800 Stimulus Programme
KLCI S&P500 3-MA Exports - rhs Ⓑ
700 -30 Ⓐ Malaysia - RM7bn ($1.93bn) stimulus
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Ⓑ US - $787.2bn economic stimulus
package by President Barack Obama
Calm before Storm Sub-prime & Crisis Green Shoots
Jan’ 05 to Oct’ 07 Oct’ 07 to Dec’ 08 Jan’ 09 - now Ⓒ Malaysia - RM60bn “mini budget”
4
5. Results
Achieved
Business Fundamentals Remain Intact
Included RM51.8m
Net NPL Ratio (%) Overhead
provision written Prudently, made
YTD Profit Before Tax (RM’m) back 502 additional
Loan Loss Coverage (%) RM56.5m SP
CASA Ratio (%)
303.3
8.0% 255 298
9.5%
151 230
62.4
14 (1QFY10 only)
5.5% 4.4%
3.3%
(283) 2.3%
2.2% 1.9%
1.8%
91% 100% 98%
72% 80% 93%
68%
33% 51% 33% 32% 35% 35% 35% 33% 35%
31% 49%
Mar 06 Sept 06 Mar 07 Sept 07 Mar 08 Sept 08 Dec 08 Mar 09 June 09
FRS 139 Initiative Maximizing Charting Through
& Restructuring Revenue Turbulence Time
April’ 06 to Mac’ 07 April’ 07 to December’08 Dec 08 onwards 5
6. 3 Months Ended 30/6/09
Results Highlight
30 Jun 09 30 Jun 08 Variance
• Group PBT decreased 62.6%
RM'mn RM'mn % compared to corresponding period last
OPERATING REVENUE 387.9 421.5 -8.0 year on the back of higher impairment
on securities by RM25.9mil made on
Net Interest Income 141.8 181.1 -21.7 potential losses against a declining
Income From Islamic Banking 58.8 39.1 50.4 economic conditions.
Net Interest Income + Income from • Higher allowance for loans primarily
Islamic Banking
200.6 220.2 -8.9 due to lower recoveries this quarter.
Other Operating Income 53.0 69.2 -23.4 • Lower operating profit mainly due to
lower gain on revaluation of forex
NET INCOME 253.6 289.4 -12.4
derivatives instruments and at the
OPERATING EXPENSES (137.0) (139.4) -1.7 same time there was a lumpy gain of
RM13.3mil on redemption of debt-
OPERATING PROFIT 116.6 150.0 -22.3 converted securities last year.
(ALLOWANCE)/WRITE BACK FOR
(54.2) 16.9 -420.7 • The Group’s net interest income
LOAN LOSS PROVISION
declined by 21.7% mainly due to OPR
PROFIT BEFORE TAX 62.4 166.9 -62.6 drop.
TAXATION (16.2) (42.6) -62.0
NET PROFIT 46.2 124.3 -62.8
6
7. 3 Months Ended 30/6/09
Results Highlight
1Q 4Q
30 Jun 09 31 Mar 09 Variance • Group PBT increased RM56.8mil
RM'mn RM'mn % compared to preceding quarter due
to:-
OPERATING REVENUE 387.9 398.4 -2.6
Lower loan loss provisions
Net Interest Income 141.8 153.3 -7.5
Income from Islamic Banking
Income From Islamic Banking 58.8 39.3 49.6 increased 49.6% due to Profit
Net Interest Income + Income from Equalization Reserve write back
Islamic Banking
200.6 192.6 4.2 as a result of two lumpy Islamic
loans provisions
Other Operating Income 53.0 60.1 -11.8
Current quarter overheads was
NET INCOME 253.6 252.7 0.4 lower as last quarter the Group
OPERATING EXPENSES (137.0) (156.0) -12.2 made additional cost for
continuous manpower
OPERATING PROFIT 116.6 96.7 20.6 rationalization exercise to improve
(ALLOWANCE)/WRITE BACK FOR productivity and efficiency
(54.2) (91.1) -40.5
LOAN LOSS PROVISION Net Interest Income decreased by
PROFIT BEFORE TAX 62.4 5.6 1,014.3 7.5% due to full impact of OPR
drop of 150 bps
TAXATION (16.2) (4.8) 237.5
NET PROFIT 46.2 0.8 5,675.0
7
8. 3 Months Ended 30/6/09
Results Highlight
Key Financial Ratios
Quarterly Ratios
% 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
*Computed based on “normalized” cost/income
^Includes PDS
8
Nd - High due to PER write back from two lumpy loans provisions
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
● Alliance Financial Group has made available additional RM600 million standby funds
Pro-active Capital for any opportunistic investment
Management
● To protect earnings
● To maintain a strong liquidity position with sustainable loans to deposit (LDR) ratio
Liquidity
Management ● Investment securities are biased for liquid assets
Robust Risk ● Proactive review of credit underwriting policies and standards
Management & ● Pre-emptive provisioning due to deteriorating economic conditions
Credit Portfolio
Quality ● Continue to build and strengthen risk management infrastructure
Operational ● Manpower management like staff redeployment, hiring freeze, natural attrition etc
Efficiency & Cost
● Leverage synergy among with further rationalization among key businesses.
Management
● Cost containment exercise
9
10. Group
Strategy
Vision
A leading integrated financial solutions provider with regional reach,
delivering the best customer experience and creating long term shareholder value.
Mission
We will deliver excellent customer experience through strategic alliances
and enhanced group synergy, employing best in class technology and human capital.
Values
Caring
CARING
Conviction
CONVICTION Integrity
CREATIVITY
Resilience Creativity
INTEGRITY
RESILIENCE
Wholesale &
Investment Bank
Commercial Consumer Islamic
Large SME SME / Mass
Corporate /Commercial Mass Market Market
Regional Hubs & Branches & Direct Marketing 3rd Parties
HO Hubs
Risk & Sales & Service Performance
Compliance Service Quality Culture
Employees Customers Shareholders Community
10
11. Loans Growth
Segmentation
Past 3-year Transformation Puts AFG on Right Target Mix
Loan Portfolio – As at FYE 30/6/08 Loans Breakdown by Businesses
FYE FYE FYE % change
3% RM Mil 31/3/08 31/3/09 30/06/09 •YoY •QoQ
10%
Consumer 8,828 10,837* 11,869* n.c. 3.2
Commercial
/SME 5,253 5,192* 5,232* n.c. 0.8
32% 55% Corporate 1,839 2,567 2,577 46.7 0.4
Loans Size
- RM17.3bn Exit Books 625 333 306 -47.1 -7.9
•Total 16,545 18,929 19,984 15.5 2.0
Loan Portfolio – As at FYE 30/6/09 Note: - n.c. – not comparable due to retagging with mass market
2% Loans Size • AFG loans growth (15.5%YoY) outpaced industry
13% –RM20.0bn (8.3% as of June 09)
• AFG loans growth +2.0%QoQ in 1QFY10 compared
to 0.8%QoQ in 4QFY09
59%
26% • 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%) 11
12. Monetary Easing Edging
Closer to End Cycle
Stresses on Net Interest Margin Lessen With Stable OPR
5.45%(n)
5.42% 5.43%
5.32% 5.22%
4.69%
3.02% 3.12%(n) 3.05% 4.18%
2.95% 2.89%
2.65% 2.63% 2.58% 66.3%
2.55% 2.62% 2.65%
2.73% 66.5%
2.56% 2.34% 83.2% 85.3%
3.5% 3.5% 3.5% 3.5%
3.25% 33.7%
33.5%
2.0% 2.0% 16.8% 14.7%
Sep07 Mar08 Jun08 Sep08 Dec08 Mar09 Jun09 June 2008 June 2009
Variable Rate Loans (AFG) Fixed Rate Loans (AFG)
Earning Assets Yield Net Interest Margin
Net Interest Margin Variable Rate Loans (Industry) Fixed Rate Loans (Industry)
OPR
(Industry)
• AFG has higher than industry average variable
• NIM fell further to 2.34% on the back of 150bps cut in rate loans
OPR rate to 2% since Nov 08 • Industry average variable rate loans rose to
Note: (n) –Normalized
67.8% in June 09 compared to 66.5% a year ago
12
13. CASA Ratio at Top
Industry Quartile
Higher CASA Keeps Cost of Funds Heading South
3.29%
2.94% 2.93%
2.92%
Deposit Portfolio – As at FYE June2008 2.88%
2.54%
2.71% 2.67% 2.71%
2.61% (n)
2.62%
3.6%
2.29% 2.18%
RM bn
2.08%(n)
36% 25.6
24.3
23.1
Fixed deposit 22.7
CASA 21.7
21.2 21.4
Money Mkt
60%
NID
Deposit Portfolio – As at FYE June2009
2.9% 6.4%
35% 36% 35% 35% 35%
32% (25%) (25%) (25%) 33% 35%
(25%) (25%)
(25%) (24%) (25%)
35% Fixed deposit
CASA Sep07 Mar08 Jun08 Jun09
Sep08 Dec08 Mar09
Money Mkt
CASA Ratio Cost of Funds (AFG)
NID
56% Note: ( ) – CASA Industry Cost of Funds (Industry)
Structured Deposit (n) – Normalized
13
14. Gearing Up for
Greater Efficiency
Costs Have Been Carefully Managed for Greater Efficiency
Personnel Cost Establishment Costs Marketing Expenses Admin & General Expenses
122.9% 54.4%
11.0%
9.8%
9.2% 50.1%
3.6%
2.6%
-3.9%
-11.6%
-26.7%
58.6% 58.1% 58.5% 24.3% 24.2% 28.3% -54.1%
13.4%
58.1% 58.5% 58.1% 58.5% 58.1% 12.6%
58.1% 58.5%
5.0% 10.5%
3.7% 2.6%
Dec08 Mar09 Jun09 Dec08 Mar09 Jun09 Dec08 Mar09 Jun09 Dec08 Mar09 Jun09
% share of total operating expenses % QoQ growth
14
15. Loan Asset
Quality
Loan Loss Provision at Top Quartile of Industry
Loan Loss Coverage – Higher than industry Non Performing Loans remains manageable
AFG Industry 100% Gross NPL Net NPL
100 98% 1500
91% 93%
87% 88% 1,354
85% 83% 83% 1,252
80%
80 77% 78% 1200 1,158
72% 77%
73% 1,032 1,009 1,016
71% 890
60 900 875
643
40 600 567
522
452 413 411 366
343
20 300
0 0
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
AFG’s gross NPL ratio – flat AFG’s net NPL ratio lower than industry
12.0 5.0 AFG Industry
AFG Industry 4.4%
10.0 Net NPL ratio lower
4.0
8.8% 3.7% than industry since
3.5%
8.0 7.9% 3.2% 3.3% Jun08
7.0% 3.0 3.0% 2.8%
2.7%
5.9% 5.6% 6.0% 2.5% 2.4%
6.0 5.4% 2.3%
5.3% 5.2% 2.2% 2.2% 2.2%
4.8%
4.5% 4.3% 4.5% 4.5% 2.0 1.8% 1.9%
4.0 4.1%
3.9%
1.0
2.0
0.0 0.0
Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-07 Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09
15
16. Capital Adequacy
Management
RWCR – Higher Than Industry Average
AFG’s RWCR @ 14.9% vs Industry’s 14.0% ABMB’s RWCR @ 13.2% vs Industry’s 13.6%
14.0% 13.6%
Jun-09 14.9% Jun-09 13.2%
AFG Industry ABMB Industry
13.4% 12.9%
Mar-09 14.7% Mar-09 13.1%
12.7% 12.2%
Dec-08 14.7% Dec-08 12.7%
13.0% 12.5%
Sep-08 14.9% Sep-08 13.1%
13.6% 13.0%
Jun-08 15.1% Jun-08 12.9%
13.3% 12.7%
Mar-08 16.2% Mar-08 14.7%
10 11 12 13 14 15 16 17 10 11 12 13 14 15 16
AFG and ABMB Core Capital
Core Capital (AFG) Core Capital (ABMB)
Jun-09 10.5%
12.7%
• AFG’s core capital and RWCR continued to
Mar-09 12.6% improve to 10.5% and 14.9% in 1QFY09
10.3%
compared to 10.3% and 14.7% in 4QFY09.
Dec-08 12.2%
• In turn, this has strengthened AFG’s balance
10.2%
12.7%
Sep-08 10.4% sheet to take stresses, as reflected in higher
Jun-08 10.4%
12.5% equity-to-asset ratio (9.0% in 1QFY10 from
12.5%
8.7% in 4QFY09).
Mar-08
11.2%
4 6 8 10 12 14 16
18. Commercial/SME Banking
Strategic Priorities
NIM
Enhancement
• drive cross-selling to existing customers
• CASA drive; loan re-pricing
• new credit program &
commission scheme
Cost
Mass Market Management
Navigate to Win
• cost reduction – marketing,
premises & staff hiring &
redeployment
• defer non-essential projects
Risk
• new credit scorecard
• greater emphasis on early Management
warning & remedial units to
contain credit losses
18
19. Other Units
Strategic Priorities
Corporate Banking
• Aggressive re-pricing • Cash management
• Zero credit loss • Cross-selling CF & DCM
• Cost containment • FX – New mindset
Alliance Islamic Bank
• Personnel financing – cashvantage & Koperasi
• Hire purchase
• Syariah compliance
Investment Banking
• 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
19
20. Long Term Value
Creation
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 & IDC Financial Insights –
CEO Award for Leadership 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)“”
20
21. Key Take Away
In Summary
- Cautiously Optimistic. We Are Here For The Long Haul.
- Business Fundamentals Remain Intact.
- Costs Have Been Carefully Managed for Greater Efficiency.
- Asset Quality Continues to Improve.
- Well Capitalized. Ahead of Industry Average.
21
22. THANK YOU
Investor Relations
Alliance Financial Group
7th Floor, Menara Multi-Purpose, Capital Square
8 Jalan Munshi Abdullah
50100 Kuala Lumpur, Malaysia
www.alliancebank.com.my/investorrelations.html
22