Alliance eyes 16pc return on equity

Group CEO Sng Seow Wah says Alliance Financial Group will be focusing on how to be more productive, to cross-sell better and drive a few areas that will help deliver fee income

Alliance Financial Group Bhd (AFG), the country's smallest banking group by assets, is aiming for a 16 per cent return on equity (ROE) within at least a year from 11 per cent now, its new chief said.

This would be in the upper range of the industry's average ROE - a measure of how well re-invested earnings are used to generate additional earnings - of between 14 per cent and 16 per cent.

"Today we're at 11 per cent, so 16 per cent may take 12 to 18 months or beyond, but certainly that's what we're aiming for," Sng Seow Wah said in his first press conference as group chief executive officer of AFG, after the annual general meeting (AGM) yesterday.

Sng joined the group on July 5 this year, replacing Datuk Bridget Lai, who left in April.

When asked about his plans for the group, Sng said he would need another three months or so to chart out details.

"One thing is clear, we can do certain things better. We'll be focusing on how to be more productive, to cross-sell better and drive a few areas that will help deliver our fee income.

"These are very broad initiatives that we'll put in place, but I will need more time to assess specifically what else we need to do," he said.

Sng stressed, however, there would be no major change to the group's growth strategy.

AFG's main focus will continue to be on consumer banking, which is its key earnings driver, and small-to-medium enterprise (SME) banking.

But he also wants the group to grow its non-interest income.

"We will be bringing to bear other products and capabilities like our investment banking, asset management and treasury," he said.

AmResearch, in a recent research note, said AFG was targeting fee income growth of 20 per cent this financial year on the back of higher wealth management and treasury income.

Chairman Datuk Oh Chong Peng said the group hopes to make a better profit this year, which would then result in better dividend payments.

It paid out total dividends of 6.4 sen a share, tax exempt, for the year ended March 31 2010.

The AGM yesterday lasted two hours, unusually long for the group, as shareholders threw the directors a range of "interesting questions" not usually asked at AGMs, Oh said.

"There were questions on accounting standards, how accounts are prepared, how provisions are made ... this is very unusual," he remarked.

Lai left following a dispute with the board over an internal probe. It was said to be an amicable parting of ways.