Analyst to possibly re-rate AMMB if initiatives flow through

KUCHING: Analysts may possibly re- rate AMMB Holdings Bhd (AMMB) if the group’s latest initiatives f low through.

Following a meetup with AMMB management recently, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) found that the group has listed out the top four aspirations by the year 2020.

MIDF Research noted that these included being top four in four focus products ( ca rds and merchant s , t ra n s ac t ion ba n k i n g , markets and FX and wealth management), top four in growth segments ( mass aff luent, aff luent, small and medium enterpr ise (SME) and mid corporate), top four in current engines (corporate loans, dept capital ma rke t s ( DCM) , f u nds management) and top four best employer.

It further noted that amongst the financial metrics are relative market capitalisation, revenue growth, return on equity ( ROE), price earnings ( P/ E), net interest margin ( NIM), cost to income (CTI) and gross impaired loan (GIL) ratio.

MIDF Research noticed the management does not consider asset growth as a financial metrics.

“We are made to understand that asset growth will be an enabler to reach the other financial metrics,” the research arm said.

MIDF Research noted that the group will be focusing on non- interest income ( NOII) growth.

The research arm did not find this surprising due to the NIM compression seen.

“Indeed, we have seen this st rat eg y coming through to its income performance,” the research arm said.

MIDF Research recalled that for AMMB’s f i rst half of financial year 2017 (1HFY17), NOII came in 16.5 per cent year on year ( y- oy) higher underpinned by higher loan underwriting fees and commission on trade faci l it ies, trading gain from fixed income and higher claims income as historical claims experience improved.

“Normally a focus on NOII may be risky given its volatile nature,” MIDF Research said.

Nevertheless, the research arm was made aware that the group will be focusing on the non volatile aspect of NOII such as fees income from cards and merchant and transaction banking.

On SMEs, MIDF Research said management indicated that SMEs will be a main focal point going forward.

The research arm added that this is a new driver for the group, where there were 12 full-fledged SME branches as at 1HFY17.

MIDF Research believed that this segment is very competitive.

“However, management indicated that the SME segment is currently underserved and it is confident that it has the capabilities to serve the SMEs with its range of products,” the research arm said.

On another note, MIDF Research liked the fact that AMMB will be targeting to grow the group’s current and savings accounts (CASA) franchise.

The research arm noted that this will ease the group’s funding cost and ease the pressure on NIM.