Alliance Bank Malaysia Bhd is expected to maintain its dividend outlook despite recent shifts in the bond market, according to a report by Kenanga Research. The research firm highlighted that rising yields on Malaysian Government Securities (MGS) in the third quarter of 2026 have put downward pressure on banks’ bond portfolio valuations, but noted the overall effect on the bank’s common equity tier one (CET1) capital ratios remains manageable.

Kenanga Research estimates that the increase in bond yields could result in about a 1% earnings impact on fixed income securities classified under fair value through profit or loss (FVTPL) for Alliance Bank, a relatively minor effect compared to some other banks. With the bank’s CET1 ratio standing at 13.4%, the research house projects that even a further rise in MGS yields would still see the CET1 ratio comfortably above 13%.

The research house reaffirmed its expectation of a 50% dividend payout ratio for Alliance Bank, reflecting confidence in the bank’s capital stability. Additionally, Kenanga Research pointed to growth potential in Alliance Bank’s wealth management segment. It noted the bank’s strategy of leveraging mortgage products to attract approximately 7,000 new customers monthly as a key driver behind deposit growth.

Alliance Bank’s regional loan financing has seen steady performance, recording about 8% year-on-year growth which includes financing for data centers. However, the bank has adopted a more selective approach regarding personal financing. Kenanga Research also highlighted anticipated intense competition to secure longer-term deposits amid expectations of further hikes in the overnight policy rate, following recent rate increases by the US Federal Reserve.

Despite these pressures, the research firm observed that competition for fixed deposits remains consistent with the bank’s revised net interest margin (NIM) guidance of 2.23% to 2.28%, as shared during the recent results briefing. The NIM buffer is seen as sufficient to offset margin pressures, supporting the maintenance of the bank’s loan growth trajectory.

Kenanga Research suggested that Alliance Bank might further improve its capital position by optimizing the evaluation and utilization of collateral used for lending. It also indicated that more disciplined management of off-balance sheet commitments toward lower risk-weighted assets could enhance the bank’s CET1 ratio.

Overall, the research house maintained its forecasts for Alliance Bank and issued an “outperform” rating with a target share price of RM5.50.