Half Year Analyst Briefing as at 30 September 2009

11

ALLIANCE FINANCIAL GROUP

ANALYST BRIEFING- 1HFY10 Results ended 30 September 2009 -

STAYING ON COURSE

22

• 1HFY10 Financial Performance

AGENDA

• 1HFY10 Business Review

• New Business Initiatives

• Q & A

33

Cautiously optimistic in leveraging competitive position

Focusing on high yielding products and robust asset quality

• Massive government stimulus has stopped world economy from shrinking further. However, the possibility of a weak recovery or a double-dip remains.

• The run-away performance of financial market is significantly fueled by excess liquidity.

• Scaling up revenue streams via high yielding products and optimizing cross-selling.

• Vigilant about asset quality via an integrated risk management, hence minimal credit losses.

• Harnessing the energy of 3-year business transformation program.

Opportunity in active capital management

• The Group has restored its balance sheet to the desired financial strength.

• Active capital management will facilitate growth and optimize return on equity (ROE):

- Reallocating capital to higher yielding businesses

- Optimizing risk-reward by global pooling and diversification of risks

Key Messages

44

• The Group‟s PBT decreased 26%

compared to corresponding period last

year as the Group has provided a

further RM97.4mil impairment to a

CLO in anticipation of future economic

conditions. The said CLO‟s provision

coverage stands at 96% as at

September 2009. This compared to

55% in June 2009.

• The Group‟s net interest income

declined by 12% mainly due to the

drop in Overnight Policy Rate (OPR).

6 months 6 months

30 Sep 09 30 Sep 08 Variance

RM'mn RM'mn %

Net Interest Income 298.0 337.1 -11.6

Income From Islamic Banking 108.8 81.9 32.8

Net Interest Income + Income from

Islamic Banking406.8 419.0 -2.9

Other Operating Income 99.8 109.8 -9.1

NET INCOME 506.6 528.8 -4.2

OPERATING EXPENSES (269.1) (255.2) 5.4

OPERATING PROFIT 237.5 273.6 -13.2

NET ALLOWANCE FOR LOAN

LOSS PROVISION(67.0) (43.6) 53.7

PROFIT BEFORE TAX 170.5 230.0 -25.9

TAXATION (46.2) (51.2) -9.8

NET PROFIT 124.3 178.8 -30.5

6 Months Ended 30/9/09 Results Highlight

55

• The Group PBT increased 73% or

RM45.7mil compared to preceding

quarter due to:-

Lumpy recovery from a

corporate loan customer

Increase in net interest income

from loans and financing on the

back on strong loan growth

Decline in operating expenses

2Q 1Q

30 Sep 09 30 Jun 09 Variance

RM'mn RM'mn %

Net Interest Income 152.9 145.1 5.4

Income From Islamic Banking 49.5 59.3 -16.5

Net Interest Income + Income from

Islamic Banking202.4 204.4 -1.0

Other Operating Income 46.7 53.0 -11.9

NET INCOME 249.1 257.4 -3.2

OPERATING EXPENSES (126.8) (142.3) -10.9

OPERATING PROFIT 122.3 115.1 6.3

NET ALLOWANCE FOR LOAN LOSS

PROVISION(14.2) (52.7) -73.1

PROFIT BEFORE TAX 108.1 62.4 73.2

TAXATION (30.0) (16.2) 85.2

NET PROFIT 78.1 46.2 69.0


66

*Computed based on “normalized” cost/income

^Includes PDS

Nd - High due to PER write back from two lumpy loans provisions

% FYE FYE 2Q 3Q 4Q 1Q 2Q

31/03/08 31/03/09 30/09/08 31/12/08 31/03/09 30/06/09 30/09/09

Net interest margin 3.0 2.8 3.1 2.9 2.6 2.3 2.6

Cost of Fund 2.7 2.7 2.7 2.6 2.3 2.1 2.0

NFI / Total income 26.5 22.4 21.3 21.8 22.4 27.8Nd 24.0

Cost Income Ratio 49.6* 53.3 49.5 54.2 61.7 54.0 50.9

^ LD Ratio 82.5 79.9 85.4 87.5 79.9 86.9 96.0

RWCR 16.2 14.7 14.9 14.7 14.7 14.9 15.4

ROAA 1.4 0.8 1.3 1.1 0.8 0.6 0.8

ROAE 16.8 8.6 13.5 11.3 8.6 6.6 8.8

Gross NPL 7.0 4.5 5.4 5.2 4.5 4.5 4.1

Net NPL 3.3 1.8 2.3 2.2 1.8 1.9 2.0

Loan Loss Coverage 79.9 99.7 91.2 92.6 99.7 97.7 89.0

Quarterly Ratios

Key Financial Ratios


77




• Q & A

88

Employees ShareholdersCustomers Community

MissionWe will deliver excellent customer experience through strategic alliances

and enhanced group synergy, employing best in class technology and human capital.

Values

Caring Conviction Integrity Resilience Creativity

Risk & Compliance

Sales &

Service

Performance

Culture

Service

Quality

Branches &

Hubs3rd PartiesDirect Marketing

Mass MarketSME / Mass

Market

SME

/CommercialLarge

Corporate

Regional Hubs &

HO

Consumer IslamicCommercialWholesale &

Investment Bank

VisionA leading integrated financial solutions provider with regional reach,

delivering the best customer experience and creating long term shareholder value.

CARING CONVICTION CREATIVITY RESILIENCE INTEGRITY

Group Strategy

9

-10

-5

0

5

10

15

20

25

Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09

Industry AFGCommercial/SME (AFG)

Consumer (AFG)

Corporate (AFG)

Consumer (Industry)

Corporate (Industry)

Commercial/SME (Industry)

Business transformation puts AFG on right target mix

Loans growth (%YoY) – AFG outpaces industry

Loans Segmentation

Sept 06 Sept 09 Sept 06 Sept 09

33.9%

50.7%47.5%

15.4% 30.8%

21.8%32.1%

49.6%59.2%

18.3%

26.1%

13.3%

1.4%

Core strengths in Consumer & Commercial Banking

• Loans portfolio, previously heavily skewed towards Corporate Banking has been reshaped towards our desired mix – Consumer and Commercial Banking along with market growth and opportunities

• Supported by strong local execution capabilities and competitive product suite

Industry Alliance Bank

1010

1,500

2,000

2,500

3,000

3,500

4,000

Jun-06 M ar-07 Dec-07 Sep-08 Jun-09

-40

-25

-10

5

20

35

50

RM mil - lhs

% QoQ - rhs

3,500

4,000

4,500

5,000

5,500

6,000


-12

-7

-2

3

8

13

RM mil - lhs % QoQ - rhs

5,500

7,000

8,500

10,000

11,500

13,000


-2

2

6

10

RM mil - lhs

% QoQ - rhs

Loans growth primarily driven by Consumer & Corporate Banking

Note: - * – not comparable due to retagging with mass market

FYE FYE FYE FYE

RM Mil 31/3/06 31/3/07 31/3/08 31/3/09 1Q 2Q •YoY •QoQ

Consumer 6,169 7,206 8,828 10,832 11,869 12,172 n. c. 2.6%

Commercial

/SME 4,212 4,238 5,253 5,859 5,232 5,362 n. c. 2.5%

Corporate 4,200 1,910 1,839 2,567 2,577 2,731 12.9% 6.0%

Exit Books - 1,139 625 333 306 288 -38.9% -5.9%

Total 14,581 14,493 16,545 19,591 19,984 20,553 9.8% 2.8%

% changeFYE 2010

*

*

*

*

*

*

Loans Breakdown by Businesses Consumer

Commercial / SME

Corporate

Loans Growth Segmentation

• AFG loans growth of 9.8% outpaced industry of 7.3% as of Sept 09

• AFG loans growth momentum strengthening +2.8% QoQ in 2QFY10 compared to 2.0% QoQ in 1QFY10

• Corporate loans grew on the back of much reduced loan base and its portfolio mix is within the desired target mix

1111

1.8%

2.2%

2.6%

3.0%

3.4%

3.8%


Industry AFG

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%


Industry AFG

23%

27%

31%

35%

39%


Industry AFG

Improving net interest margins on high CASA ratio

Earnings Check Points

25%

35%

45%

55%

65%


Industry AFG

2.8%

3.1%

2.8%

3.1% 3.1%

2.9%

2.3%

2.6%

2.6%

2.6%

2.7%

2.7%

2.7%

2.6%

31.6%

33.8%

32.5%

35.1%35.6% 35.5%

34.6%

38.0%

25.5% 25.5%

24.8%

25.3% 25.3% 25.3%

25.4%

26.2%

3.0% 3.0%2.9%

2.7%2.6% 2.6%

2.1% 2.0%

3.1%

3.4% 3.4%3.2%

2.9% 3.0%

2.2%2.1%

55.4%

53.7%

54.5%

49.6%

28.7%

48.2%

54.3% 54.0%

50.9%

61.7%

45.3%42.9%

43.6%46.1%

48.1%46.0%

45.7%

Visible improvement in net interest margin CASA ratio at top quartile of the industry

Lower than industry’s cost of funds AFG’s cost-income ratio decelerating fast

2.6%2.7%

1212

Cost management – one of the key drivers of improved bottom-line

Dec08 Mar09

58.6%

Jun09

62.1%

Personnel Cost

58.1% 58.5%

11.0%

9.2%

-11.6%

% share of total operating expenses % QoQ growth

Dec08 Mar09

24.3%

Jun09

Establishment Costs

24.2% 28.3%

-3.9%

9.8%

2.6%

Dec08 Mar09

3.7%

58.1%

Jun09

Marketing Expenses

5.0% 2.6%

50.1%

-54.1%

122.9%

Dec08 Mar09

13.4% 58.1%

Jun09

Admin & General Expenses

12.6% 10.5%

3.6%

-26.7%

54.4%

-1.8%

Sep09

25.8%

-15.7%

Sep09

2.3%

Sep09

-20.3%

9.9%

Sep09

-13.1%

Gearing Up for Greater Efficiency

1313

0

300

600

900

1200

1500

Dec-07 M ar-08 Jun-08 Sep-08 Dec-08 M ar-09 Jun-09 Sep-09

0.0

2.0

4.0

6.0

8.0

10.0


0.0

1.0

2.0

3.0

4.0

5.0


0

20

40

60

80

100


Improving asset quality, resulting in minimal credit losses

Loan Loss Coverage – Higher than industry

AFG’s gross NPL ratio – declining further

AFG Industry

87%

100%

93%

83%

91%

83%85%

78%80%

77%77%

73%

AFG Industry

AFG’s net NPL ratio lower than industry

AFG Industry

Net NPL ratio lower

than industry since

Jun083.7%

3.2% 3.3%

3.0%

2.7%2.8%

2.3%2.5%

2.2%2.4%

1.8%

2.2%

7.9%

7.0%

6.0%5.4%

5.2%4.5%

5.6% 5.3%4.8%

4.5% 4.3% 4.1%

98%

88%

4.5%

3.9% 1.9%

2.2%

89%88%

4.1%3.8%

2.0%2.1%

Loan Asset Quality

Non Performing Loans remains manageable

Gross NPL Net NPL

1,2521,158

1,032 1,009 1,016

875

567522

452 413 411343 366

890

403

845

14144 6 8 10 12 14

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

10 11 12 13 14 15 16

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

10 11 12 13 14 15 16 17

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Strengthened balance sheet with strong capital position

AFG’s RWCR @ 15.4% vs Industry’s 14.5%

AFG and ABMB Core Capital

ABMB’s RWCR @ 13.5% vs Industry’s 14.0%

AFG Industry

Core Capital (AFG) Core Capital (ABMB)

ABMB Industry

13.0%14.9%

13.6%15.1%

13.1%

12.2%12.7%

12.5%13.1%

13.0%12.9%

10.2%12.2%

10.4%

10.4%12.5%

12.7%

12.6%

14.7%

14.7%

14.9%

12.6%

13.6%

14.8%14.3%

13.2%

12.7%

10.3%

10.5%

• AFG’s core capital and RWCR continued to improve to 11.1% and 15.4% in 2QFY10 compared to 10.5% and 14.9% in 1QFY10

• In turn, this has strengthened AFG’s balance sheet ability to take stresses, as reflected in higher equity-to-asset ratio (9.4% in 2QFY10 from 9.0% in 1QFY10)

15.4%14.5%

13.2%11.1%

13.1%

14.0%13.5%

Capital Adequacy Management

1515

RM'm

Total

Issuance

AFG's

Exposure

Total

Issuance

AFG's

Exposure

Total

Issuance

AFG's

Exposure

● Total Issuance 1,000m 175m (17.5%) 800m 240m (30%) 1,000m 10m (1%)

● Maturity Date

Kerisma Idaman Capital CapOne

Jun-09 Oct-11 Sep-10

Collaterized Loan Obligations (CLOs) are a matter of the past

• As at Sept 2009, the Group has made 96% provisions in Idaman Capital (55% as of June 2009)

• Management will make full provisions on this account by end of this financial year

• The additional provision is expected not to have an impact to the bottom line

Key points: • Impairment provision – none

• Small exposure of AFG on it

• AFG has 100% exposure at super senior level

• Matured already

• Total exposure covered although expected write-backs will be used to cover provision for Idaman Capital in particular

Update on CLOs

1616

FRS139

• Meet regulatory requirements by year end

• Parallel run and test in Q1 2010

• Potential for write-back in FY2010-11 in retained profits

• Build account-level pricing and margin management

capability

• Develop enhanced tools for financial management,

leveraging approach to Basel II

FRS139

Working to develop impairment calculation tools that will give us

an information advantage

1717




• Q & A

1818

Alliance Bank Strategic Priorities

3rd Vertical

Commercial Non

Programme

Active

Financial Market

Integrated

Wealth

Management

Consumer Banking

Segment Based

Driven

High Yield ‘Koop’

Loans

Navigate to Win

Stock-broking

Transformation

Primary focus to strengthen business fundamentals

19

Integrated Wealth Management

Wealth Mgmt.products/services

DPM

Mass Affluent / Affluent products and services

Retail Bankingproducts/ services

Current & Savings Accounts

Brokerage

Payment & Credit Cards

Life Insurance

Consumer Credit

Mortgages

Payments & Transactions

Fund Portfolio Management

Tax Advisory

Estate Planning

Financial Planning/

Asset AllocationStructured Products

Arts

Warrants

Family

Office

Alternative Investments

Mutual Funds

• Both Mass Affluent and Affluent customers require basic products from one-stop-shops

• Extending the product range is the obvious next step to serve the more sophisticated clients…

• … but the distribution of such Wealth Management products require a different approach

based on a needs-based holistic financial advice concept

The way forward to put the Group in an advantageous position

2020

3rd VerticalCommercial Non-Program

Commercial~24,000

SME~175,000

Corporate

~3,000

Micro

~488,000

We are targeting two customer

segments:

• Customers in certain Specialized

Industries segments such as Palm Oil

Milling, Rice Milling, General

Contracting, Non-Infrastructure Contract

Financing and Investment Holding

Companies for properties for self use

• Family controlled businesses that are

above the SMEC cut off and those that

do not fit into Corporate Banking. These

companies will generally have Group

turnover between RM150mn to

RM500mn (individual business entities

may have lower turnovers)

Non Program

(Commercial Banking)

SMEC

(SME Banking)

RM1.0mil

RM25.0mil

RM150.0mil

Annual Sales Turnover

Building long term relationship with clients

2121

Stock-brokingTransformation

Broking Branches (Pure Stock-Broking)

• Continue to exist as a pure stock broking branch in strategic

locations

• Regulatory and legal framework – exists as a branch under jurisdiction of SC and Bursa

• Trading will use leased lines and back office will be hubbed

Share Trading Center (STC) Bank Branches

• Fully manned by bank branch officers

• Regulatory and legal framework – Under direct jurisdiction of BN. CMSA “Registered Person” jurisdiction in dealing of securities under SC and Bursa

• All share related transactions including CDS and account opening handled by bank front desk

• Trading will be through Excelforce and any back office support will be hubbed

Retail Broking

Institutional Broking

Hubbed Back-office

Bank Branch

Share Trading with STC

1

2

Stock

Broking

IPOs

ETFs

MarginFinancing

ForeignShares

Sales &Trading

Lower Fixed Cost from

Network Rationalization

Shifting into Variable Capacity

(Capital)- with STC Model

Rapid Expansion in line with Volume Growth

Repositioning Stock-broking as an opportunity

2222

ActiveFinancial Market

High

Margin

Low

Margin

Relationship

Focused

Inter Bank

FocusedRisk & Liquidity Management

Sales and Trading

Innovative Solution

Sales & Trading

Solution

Structuring

Capability

Our Market Positioning

Q3 2007

Q3 2009

MUREX System Will Further Improve Our Capabilities…

• Distribution Platform

• More products

• Future revenue streams

Going Forward

Portfolio Mix - Govt Focused

• Investment Portfolio 70% limited to Government

Risk

• The low risk Government exposure resulting in

lower return

Low Market Risk Limits

• Management Trigger currently limited to RM60mil

or 2% of Shareholders‟ Funds

• This provides low buffer for price volatility; and

• Investments limited to short tenors to mitigate

price volatility – max 3 years – resulting lower

return

At Present

Driving Financial Market as a profit centre

2323

ITSM Software

Implementation

Self Service

Terminals Monitoring

System

Dec 07 June 08 Dec 08

Call Centre

Ph2 - IVR

ATOS Ascent

Credit Card

System

Mass Market

(Alliance Rakan)

FTP

Trade Finance

Branch Server

Refresh

BT1 Trading

Platform

Operation Risk

Basel II

Credit Risk Mgt

Collateral

MgtIslamic

Bkg Entity

Cheque

Truncation

Premium Master

Debit Card

Murex

Treasury System

Loan Origination

(CC/PL/MM)

Loan Origination

(HP/Mortgage)

Islamic Std

Debit Card

Jun 09

Launch of

You-nique

Card

SME Score Card

Sales

Performance

and

Compensation

System

Long Term Value CreationInformation Technology (IT)

Major IT milestones

2424

Implementing Learning &

Development Framework

•Designed Leadership

Competency and

development programmes

for staff in leadership roles

•Competency Based Training –

Introduced Learning Directory

for Core Competencies,

Regulatory/Compliance and

Functional Competencies

•Designed Career

Development and Learning

Roadmaps by job families

226 sessions of in-house learning and development courses/events have been organised with

more than 5,000 participants during Jan to Oct 2009.

Long Term Value CreationHuman Capital

Learning and development framework

2525

Managing human

resource capacity

in line with

business volume

Manage ongoing

projects to

ensure only

essential ones

are carried out

Review process

to reduce

wastage and cost

of doing

businessRevise contracts

with vendors and

service providers

to obtain best

prices on basis of

economies of

scale

SUSTAINABLE COST

REDUCTION

INITIATIVES

• The initiatives involve

major remodeling of

business and operations

that will yield long term

cost savings and

operational efficiencies

• The initiatives are now at

varying completion stage

and all of which will be

completed before the

financial year end

Long Term Value CreationCost Management Initiatives

Key component in driving productivity and efficiency

2626

• Improvement in customer service and processing time above industry average

• Underwriting turnaround time better than industry

2007 2008 2009

Processing Time in Days Alliance Industry Alliance Industry Alliance Industry*

Housing Loan 1.2 2.7 1.2 2.4 1.5 2.6

Credit Cards 5.0 5.5 4.5 4.5 2.8 5.0

New biz financing < RM250,000 1.0 5.4 1.0 5.3 1.0 5.4

New biz financing RM250,000 - RM500,000 2.0 7.0 2.0 8.3 1.0 7.7

New biz financing above RM500,000 10.0 12.9 10.5 13.4 11.0 13.2

Teller Wait Time 7.5 4.2 5.3 3.9 2.1 4.1

ATM Up Time (%) 94.6 97.4 96.4 97.9 97.2 97.7

Complaint Resolution (Addressed) 5.1 3.4 3.9 2.6 2.8 3.0

Underwriting Turnaround Time :-

Mortage Loans (ML) 0.9 1.4 0.9 1.3 1.3 1.4

Hire Purchase (HP) 0.7 0.7 0.7 0.7 0.6 0.7

Credit Cards (CC) 1.0 2.5 1.0 2.4 1.0 2.5

*Average values from past years as industry benchmark results for 2009 is not available yet.

Long Term Value CreationProductivity Enhancement

Operational efficiency and effectiveness

2727

Alliance in the community

• 31 August - Charity Drive in Aid of the FSIC„contribution of 48 boxes filled with clothing, shoes, bags,

household utensils and a total 190kg of rice’

• 25 July - The Edge-Haven My Dream Home

Contest 2009

„sponsorship for the third consecutive year’

• 6 July - Alliance Bank Expands Network with

Facilities to Cater to the Physically Challenged„by providing easy accessibility to the physically

challenged’

July - September 09:

• 6 June - Charity Drive by Share Services„visit to the House of Joy in Puchong, Selangor’

• 28 May - Golden Bull Award 2009„sponsorship for the seventh consecutive year’

• 2 May – Labour Day Assembly 2009„sustain team spirit and good working culture’

April - June 09:

• 30 April – Alliance Bank Donates RM40,000 to

Wildlife Conservation„Virtual Pet Coinbank Campaign to save endangered

species’

• 25 April – AIS Contributes to PEMANGKIN„contribution of RM30,000’

Corporate Social Responsibilities

2828

THANK YOU

Investor Relations

Alliance Financial Group7th Floor, Menara Multi-Purpose, Capital Square

8 Jalan Munshi Abdullah

50100 Kuala Lumpur, Malaysia

www.alliancebank.com.my/investorrelations.html