AMMB’s share prices weaken despite good 1QFY17 results
KUALA LUMPUR: Share prices of AMMB Holdings Bhd (AMMB) continue to pare down yesterday in spite of the group announcing good results for the first quarter of its financial year 2017 (1QFY17).
The shares continue to weaken beginning on Wednesday when the stock resumed trading following the announcement of the merger call-off between AMMB and RHB Bank Bhd (RHB).
To recap, both AMMB and RHB stocks were suspended for trading on Tuesday when they formally announced on Bursa Malaysia that they would cease merger talks, being unable to reach agreement on mutually acceptable terms and agreements for the proposed merger.
When both stocks resumed trading the next day, RHB saw an expansion of 3.89 per cent to RM5.07 while AMMB saw a decline of 2.34 per cent to RM4.59.
Since then, AMMB has announced an optimistic first quarter of financial year 2018 (1QFY18) results which showcase overall improvements in its earnings with a 3.2 per cent year over year (y-o-y) increase in profit before provision (PBP) to RM429.1 million.
This was further supported by an 8.4 per cent higher net interest income (NII), an 8 basis point improved net interest margin (NIM) to 2.02 per cent, and higher top-line growth in the group’s business banking, transaction banking, global markets and mortgages segments.
“Our loans and financing base recorded a modest growth of 2.0 per cent year-to-date (YTD) underpinned by business banking loans base which grew 4.6 per cent YTD as well as mortgages at +4.3 per cent YTD,” said AMMB group chief executive officer (CEO) Dato’ Sulaiman Mohd Tahir in a press release.
Looking forward, Sulaiman added, “We are currently focusing our investments in growth areas.
“On a quarter over quarter (qo-q) basis, expenses fell by 5.1 per cent whilst cost-to-income ratio improved by 1.6 per cent as a result of our concerted effort in keeping a tight rein on our operating costs.”
However, these results were not enough to quell the share price volatility of AMMBas it continued to see further weakening by 2.18 per cent further to RM4.49 at closing yesterday.
Speaking on the phenomenon, Danny Wong, chief executive officer and director of Areca Capital Sdn Bhd – an investment management firm – said that the recent run down on the stock may not necessarily be reflective of negative sentiments from the market.
“AMMB’s share price was running ahead previously to assume that the group would be benefitting from the merger, but now that that’s off, its share price is just normalising,” he said in an interview with The Borneo Post.
Rumours of the potential RHBAMMB merger began circulating earlier this year in the beginning of April when the stock was floating at circa RM4.80.
And since then, AMMB’s stock has rallied to a two-year peak of RM5.62 on May 2 and began a steady decline since then.
Based off this reasoning, it is likely that AMMB’s share price is just normalising as the investors are no longer pricing-in the merger. Looking forward, Wong opined that AMMB would be continuing to look into potential suitors for a merger in order to diversify their shares.
Meanwhile, Wong continued on to suggest that RHB’S expansion in its share price yesterday was most likely due to their improved performance results.
“Looking at a RHB in isolation the bank alongside with CIMB Group Holdings Bhd (CIMB) and Maybank Banking Bhd (Maybank) have recently seen improvement in their asset quality and combined that with our GDP growth and their regional exposure, it might be reflective of a strengthening bank instead.”