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RAM Ratings affirms Alliance Bank and Alliance Islamic’s AA3 ratings
Published on 31 Jul 2026.
RAM Ratings has affirmed the AA3/Stable/P1 financial institution ratings of Alliance Bank Malaysia Berhad (the Group) and Alliance Islamic Bank Berhad, together with the ratings of their respective debt and sukuk facilities (Table 1).
The affirmation reflects the Group’s resilient asset quality, established position in SME lending, favourable funding and liquidity profile and above industry net interest margins (NIMs). These strengths are, however, moderated by the Group’s small stature.
Alliance Bank’s gross impaired loan (GIL) ratio improved to 1.7% as at end-March 2026 from 1.8% a year earlier (industry: 1.4%), due to robust loan growth and recoveries from two large corporate accounts. Although early-stage delinquencies in the SME and consumer segments have risen over several quarters, overall credit quality remains manageable, given proactive account monitoring, customer engagement and a well-collateralised loan book. The SME GIL ratio increased 15 bps to 2.0% but remained below the industry average of 3.0%, underscoring the Group’s relatively stronger underwriting performance in its core segment. We expect asset quality to remain healthy, despite persistent cost pressures, geopolitical uncertainties and softer household purchasing power, which could weigh on borrower repayment capacity and business margins.
The Group maintained a strong funding and liquidity profile, underpinned by healthy proportions of current and savings account deposits (end-March 2026: 37%) and individual deposits (43%), both exceeding industry averages. This relatively low-cost and granular deposit base combined with its SME-focused lending franchise, led to a NIM of 2.35% in FY Mar 2026. Although narrower y-o-y, it remains among the highest in the banking sector.
Capitalisation strengthened following the completion of a RM600 mil rights issue in July 2025. The Group’s post-dividend common equity tier-1 capital ratio rose to 13.2% as at end-March 2026, providing sufficient capacity to support growth and absorb potential impairment pressure. A more moderate credit expansion also helped sustain capital levels.
Pre-tax profit climbed 8% y-o-y to RM1.1 bil in the financial year, driven by loan growth, stronger trading and investment income, and higher fee and wealth management contributions. The pre-tax return on assets moderated slightly to 1.20%, reflecting margin compression.
Alliance Islamic’s financial institution ratings are equated to Alliance Bank’s in view of its strategic importance to the Group, close operational integration and role in supporting the Group’s Islamic banking franchise.
Table 1: Ratings of Alliance Banking Group entities
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
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2026 by RAM Rating Services Berhad
Rating Rationale: Alliance Bank Malaysia Berhad
